FORM 10-KSB/A
                               (Amendment No. 1)

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934

         For the fiscal year ended: July 31, 2005

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934.

       For the transition period from _______________ to ________________

                         Commission file number 0-11485

                         ACCELR8 TECHNOLOGY CORPORATION
                  --------------------------------------------
                 (Name of small business issuer in its charter)

                   Colorado                                84-1072256
         ------------------------------                 ---------------
        (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                 Identification No.)

              7000 North Broadway, Building 3-307, Denver, CO 80221
              -----------------------------------------------------
                    (Address of principal executive offices)

                    Issuer's telephone number: (303) 863-8088

Securities registered pursuant to Section 12(b) of the Exchange Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of class)

Securities registered pursuant to Section 12(g) of the Exchange Act: None.
                                                                     -----

Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes   X   No
             -----     -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

The Registrant's revenues for the fiscal year ended July 31, 2005 were $502,110.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of October 12, 2005 was approximately $29,064,271 based upon the
last reported sale on that date. For purposes of this disclosure, Common Stock
held by persons who hold more than 5% of the outstanding voting shares and
Common Stock held by officers and directors of the Registrant have been excluded
in that such persons may be deemed to be "affiliates" as that term is defined
under the rules and regulations promulgated under the Securities Act of 1933, as
amended. This determination is not necessarily conclusive.

The number of shares of the Registrant's Common Stock outstanding as of July 31,
2005 was 9,961,210.

Documents incorporated by reference None

Transitional Small Business Disclosure Format        Yes         No   X
                                                         -----      -----

<PAGE>


TABLE OF CONTENTS
                                                                           PAGE
PART I
     Item 1.      Description of Business .................................  3

     Item 2.      Description of Property ................................. 18

     Item 3.      Legal Proceedings ....................................... 19

     Item 4.      Submission of Matters to a Vote of Security Holders...... 19

PART II
     Item 5.      Market for Common Equity and Related Stockholder Matters. 27

     Item 6.      Management's Discussion and Analysis or
                    Plan of Operation  .................................... 27

     Item 7.      Financial Statements .................................... 27

     Item 8.      Changes in and Disagreements With Accountants on
                    Accounting and Financial Disclosure....................  27

     Item 8A.     Controls and Procedures .................................  27

     Item 8B.     Other Information .......................................  27

PART III
     Item 9.      Directors, Executive Officers, Promoters and Control
                    Persons; Compliance With Section 16(a) of the
                    Exchange Act...........................................  28

     Item 10.     Executive Compensation ..................................  31

     Item 11.     Security Ownership of Certain Beneficial Owners and
                    Management and Related Stockholder Matters.............  36

     Item 12.     Certain Relationships and Related Transactions...........  37

     Item 13.     Exhibits ................................................  38

     Item 14.     Principal Accountant Fees and Services...................  38

SIGNATURES ................................................................  40

Financial Statements ...................................................... F-1

Notes to Financial Statements ............................................. F-6

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FORWARD-LOOKING STATEMENTS.

     This Annual Report on Form 10-KSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Company, as defined below,
intends that such forward-looking statements be subject to the safe harbors
created thereby. These forward-looking statements include the plans and
objectives of management for future operations, including plans and objectives
relating to the products and future economic performance of the Company. The
forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions that the Company will retain key management
personnel, that the Company's forecasts will accurately anticipate market demand
for the Company's products and that there will be no material adverse change in
the Company's operations or business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
results contemplated in forward-looking information will be realized. Although
management believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated in
forward-looking information will be realized. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In addition, as disclosed elsewhere
in this Annual Report, the business and operation of the Company are subject to
substantial risks that increase the uncertainty inherent in such forward-looking
statements. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved.

PART I

Item 1.  Description of Business

History And Development Of The Company

     Accelr8 Technology Corporation ("Accelr8" or the "Company"), a Colorado
corporation was incorporated on May 26, 1982. The Company's office and
laboratory are located at 7000 North Broadway, Building 3-307, Denver, Colorado
80221, and our telephone number is 303-863-8088.

     On January 18, 2001, we acquired the OpTest portfolio of technologies
("OpTest") from DDx, Inc. ("DDx"). Since the acquisition of the OpTest assets,
we have focused primarily upon furthering the research and development of the
acquired technologies, and the development of revenue producing products related
to that technology. The purchase of OpTest provided us with a proprietary
surface chemistry formulation and quantitative bio-analytical measurement
instruments.

     Before our acquisition of OpTest, we provided software tools and consulting
services for system modernization solutions for VMS legacy systems. On July 30,
2004, we completed the sale of the assets related to the software business,
which consisted of tools for legacy-code modernization and the resale of
third-party software (the "Software Migration Business") to Transoft Group Ltd
(the "Asset Sale").

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Business Strategy

     Our vision is to develop and commercialize an innovative, integrated system
for rapid identification of bacteria and the determination of their antibiotic
resistance in critically ill patients. Our business strategy is to penetrate a
large market segment, develop profitable sales growth, and demonstrate the value
of our technology in the broad market for biomedical products with the intent of
licensing our proprietary technology to market leaders.

Products

     We have developed an innovative bacterial analysis system, the
BACcelr8r(tm), which we intend to eventually be used in clinical diagnostics for
life-threatening bacterial infections. The system integrates our proprietary
technologies to provide advantages in bacterial strain identification,
particularly with regard to antibiotic resistance. Proprietary technologies
include OptiChem(r) surface coatings and assay processing methods. We have
received patents or we have patent applications pending for the major technology
components and systems.

     Our first laboratory BACcelr8r research model, Version 0.1, is used in our
own internal research to investigate and characterize the biological principles
that we believe confer advantages upon our analytical methods. In July 2005, we
began development of a higher-throughput laboratory model, Version 0.4, which we
believe will gather large data sets to validate our analytical methods. We
intend to use Version 0.4 for additional internal research as well as in
independent academic research laboratories who will perform research on our
behalf. We expect the first delivery of Version 0.4 devices during the 2006
calendar year.

     Following the research with Version 0.4, we plan to develop a commercial
version intended for hospital use in clinical diagnostics for life-threatening
infections. Since approximately the end of the 2004 fiscal year we have devoted
substantially all of our technical resources to the BACcelr8r project.

     In addition to the BACcelr8r project, we have developed and licensed
OptiChem(TM) surface coatings for use in microarraying components. We have
granted Schott Jenaer Glas GmbH("SCHOTT"), which is a global leader in
high-quality glass manufacturing, a two-year exclusive global license with an
additional one-year option to manufacture and market OptiChem microarraying
products. The current license includes the use of OptiChem on glass slides for
gene and protein microarraying. SCHOTT also has options to license OptiChem for
use in arrayable microtiter plates, and for new OptiChem formulations used in
microarraying.

     OptiChem revenues for the year ended July 31, 2005 were $336,610.
Management believes that substrate sales will continue and that there will be
royalties from the licensing with SCHOTT in the next fiscal year; however, there
can be no assurance that sales will occur or that the anticipated revenues will
be generated.

     In a strategy similar to our OptiChem licensing program, we intend to
customize our technologies to the specific requirements of additional large
licensees when opportunities become available.

The Problem of Antibiotic Resistance

     Since their first commercial introduction in the 1940s, antibiotics have
revolutionized the treatment of bacterial infections. However as antibiotic
usage has become widespread throughout the world, many bacterial strains have
emerged that express resistance to currently marketed antibiotics.

     The cost and risk of new drug development has continued to rise and the
rate of new antibiotic development has decline. As antibiotic resistance
continues to worsen and spread, we believe that the physician's challenge today
is to select from an ever-shrinking list of possibilities; the antibiotics that
might succeed in each individual case.

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     Management believes that ideal therapy consists of the narrowest-spectrum
antibiotic (limited range of affected species) that delivers the quickest and
most complete kill of the bacteria known to cause the infection. To do this,
management believes that the physician needs a detailed analysis of the exact
antibiotic responsiveness in each individual case.

The Medical Microbiology Market Opportunity

     The clinical microbiology laboratory now typically requires from less than
two to five days to grow and analyze a bacterial culture for antibiotic
susceptibility. With patients who have rapidly-progressing infections the
physician cannot wait for lab results and therefore must use a combination of
powerful, broad-spectrum drugs in the hope of arresting the infection. Published
studies have shown that in approximately 25% to 50% of such cases, "empiric"
therapy fails to adequately control the infection.

     Furthermore, a study of the BAL (lung fluids) data on the therapy and
outcome of VAP showed that changing the therapy later than approximately 24
hours did not significantly improve outcomes for most patients. Management
believes that the inherent delay with current bacterial culturing methods can
significantly increase a patient's medical risk. Patients who receive inadequate
initial therapy may face extended hospitalization and increased risk of
worsening disease severity and mortality.

     Today's tests still employ culturing methods that were first popularized in
the 1870s. "Culturing" consists of growing bacteria from a patient specimen
(such as blood) in an artificial nutrient medium that stimulates growth. After
growing "colonies," which are discrete clusters of bacteria on a gel plate
surface, the microbiologist then physically picks representative sample colonies
for further growth and analysis. These "isolates" require many hours to prepare
and many additional hours to analyze. As a result, lab results usually require
from one to five days, or even longer for slow-growing organisms, before the
physician receives the results after submitting a patient specimen.

     Management believes that standard culturing results only list possibly
effective drugs and do not determine which drug might be the most effective, but
rather indicate whether an antibiotic appears to be effective in culture, and
not how quickly or completely it may kill one particular patient's bacteria.

     We believe the BACcelr8r will help physicians reduce the severity and
mortality risk of life-threatening infections by providing much quicker and more
precise analyses than are possible with culturing. Our objective is to provide
complete bacterial strain characterization, including antimicrobial
responsiveness, in less than 8 hours after the hospital lab receives a patient
specimen. We also intend to identify and count bacteria by species in less than
2 hours.

Hospital Acquired Infections (HAI)

     We believe that the Intensive Care Unit (ICU) is the hospital area that has
the most urgent problems with regard to controlling aggressive infections and
that severe illness treated in the ICU, often weakens a patient's defenses
against infectious organisms of all types. Management believes that the hospital
also exposes patients to a reservoir of aggressive pathogens that may have
evolved resistance to the most commonly used antibiotics.

     According to the FDA, "about 70% of bacteria that cause infections in
hospitals are resistant to at least one of the drugs most commonly used to treat
infections." The Centers for Disease Control and Prevention has stated that
antibiotic resistance is among the organization's top public health concerns.
The global spread of drug-resistant microbes has led to prolonged
hospitalizations, and increased health care costs. Despite the antibiotic
revolution, bacterial infections remain a leading cause of mortality in
critically ill patients. Once microbes become resistant, infections can become
difficult or impossible to treat.

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     Hospital-acquired pneumonia is the leading cause of death from infections
acquired in the hospital. In the ICU, the most common of hospital-acquired
pneumonia is ventilator-associated pneumonia (VAP). It is the most common
life-threatening infection contracted by patients during their hospital stay.
Worldwide, over one million patients annually are at risk of developing VAP.
Because these patients are critically ill before contracting pneumonia, the
infection can have particularly serious consequences. A review of papers in
medical journals highlights the fact that no medical "standard of care" now
exists for diagnosing VAP and identifying the organisms that cause it.

     VAP is a direct result of mechanical ventilation (an element of life
support), which requires the insertion of a tube deep into the patient's trachea
(windpipe) and connects to a sophisticated mechanical air pump. The airway tube
renders the patient vulnerable to infection because it facilitates leakage of
microbes from the mouth into the airway and the lungs. The longer the tube is in
place, the greater the risk that a patient will develop VAP.

     Management believes that there are approximately one million patients
annually in the United States, Europe, and Japan who are on mechanical
ventilation for two or more days and thus are at substantial risk of developing
VAP. Approximately 9% to 27% of patients who require mechanical ventilation for
at least two days develop VAP. In spite of empiric antibiotic therapy, patients
who develop VAP spend, on average, seven to nine extra days in the ICU, which
adds incremental costs that range approximately from $12,000 to $40,000. The
Joint Commission on Accreditation of Healthcare Organizations has identified VAP
prevention as a core ICU performance measure. Performance measurements are used
by hospitals to support performance improvements and to demonstrate
accountability to external stakeholders, including insurance companies.

     Because of these reasons, we believe that rapid antibiotic susceptibility
testing for the bacteria that cause VAP represents an urgent unmet medical need
and an attractive market opportunity. We are developing the BACcelr8r with the
intent of meeting this need.

     We believe that physicians may also order the BACcelr8r to help diagnose
the causes of certain other types of life-threatening bacterial infection. After
we introduce a respiratory infection detection product, we intend to add
cartridges for bacterial meningitis, community-acquired pneumonia, wound
infections (including those arising after surgery), and other specific infection
categories. The BACcelr8r system will include a fixed instrument and proprietary
single-use analytical cartridges. By changing only a small set of cartridge
assay components we believe we can change the bacterial species identified by
the cartridge to fit a new diagnostic application. Many such "panels" of target
organism overlap in medical diagnostics, reducing the complexity of new
application development.

     Finally, we believe that proof of the BACcelr8r's ability to perform rapid,
highly sensitive and specific analysis will also showcase the commercial value
of Accelr8's proprietary technologies to industry leaders.

"Quantum Microbiology(tm)"

     We developed a new analytical strategy in order to eliminate bacterial
culturing and isolation and thus eliminate the most time-consuming steps in
bacterial testing. We call this strategy "Quantum Microbiology(tm)" (or "QM") to
emphasize its ability to analyze each individual organism in a sample that
contains tens of thousands of bacterial cells. Management believes that Quantum
Microbiology adds substantial value to our intellectual property, and it is the
method embodied in the BACcelr8r.

     The QM method identifies and maps each individual bacterium extracted from
a sample as it is immobilized on an assay surface. It then conducts a series of

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texts on the immobilized cells and computes a statistical profile to identify
each significant strain type in the sample. Strain typing or "phenotyping"
includes assessment of antimicrobial responses.

     We believe that this strategy has major implications when compared to
standard culturing methods. Speed is only one aspect, as we believe that QM can
produce a complete analysis within the 8-hour objective established for the
BACcelr8r. In addition, we believe that QM has the potential to identify hidden
or minority resistant strains and that standard methods only reveal the
properties of the fastest-growing organisms in a culture. We believe that they
usually ignore slow-growing strains or minor strains that can become
"superinfections." Early tests also demonstrate that QM makes it possible to
automate certain types of sequential analysis that are too difficult to automate
with today's high capacity automated systems. Therefore management believes that
QM and the BACcelr8r have the potential to make a significant impact on the
practice of clinical microbiology.

BACcelr8r Technology

     The BACcelr8r implements QM methods by using a computerized microscope with
proprietary image analysis software to analyze each individual organism's
responses to a series of tests. The Version 0.1 lab model now in use at Accelr8
demonstrates the feasibility of automating QM.

     The BACcelr8r instrument will contain computer boards, analyzer optics,
electromechanical actuators, power supplies, and other subsystems that do not
need to be disposable. Each single-use cartridge (or "cassette") will contain
assay surfaces, sample introduction ports, and couplings for fluids, electrical
circuits, and optical interfaces. Cassettes may also contain reagents in small
on-board reservoirs. The single-use cassettes will contain most assay
ingredients that cannot be re-used. In a typical application, the operator will
use one cassette per test and dispose of the cassette when the test ends.
Cassette and instrument designs are proprietary and wholly owned by Accelr8.

     As envisioned, in a typical application the operator will perform basic
specimen preparation (such as blood, lung fluids, etc.) and introduce a small,
standardized volume of sample into a cassette and insert the cassette into the
instrument. All remaining operations will take place under computer control
without operator intervention in normal operation. During the analysis the
system will automatically report its operating status and current results for
each cassette being processed.

     We believe that the system will perform four basic processes. First, it
will rapidly distribute the sample to multiple flow channels, each having its
own assay surface, then extract and immobilize individual bacteria from the
sample onto each of those surface areas. Second, it will perform presumptive
species identification and map the physical location of each immobilized
organism in each flow channel. Third, it will measure the growth rates of the
individual immobilized organisms for a brief period. Fourth, it will deliver a
different antibiotic to each flow channel and measure the rate at which each
different drug kills or attenuates the growth of each identified organism.

     At the end of the second step (presumptive species identification) we
believe that the system will report the number of organisms for each species in
the analytical panel. We plan the first hospital BACcelr8r version to have a
panel of approximately nine species and approximately sixty different
antimicrobial agents and combinations.

     We believe that the system will eliminate culturing and isolation by
directly analyzing all of the organisms extracted from the sample without prior
growth. We believe that it will quickly extract the organisms using an
electrical field to drive the bacteria to a universal capture surface. We
believe that OptiChem coatings within the sample distribution flow passages will
mostly prevent bacteria from adhering to the passage walls. The OptiChem
coatings and the electrical extraction method are part of Accelr8's intellectual
property.

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     Management believes that the BACcelr8r project illustrates the importance
of discovering new ways to perform analyses at a very small scale with high
sensitivity and ultra-low interference. Similar principles apply to other
potential new versions of the integrated platform. We believe that by developing
this system we will be in position to offer a customizable platform with short
time to market for other companies who are in the business of marker discovery
useful for drug discovery, molecular diagnostics, and other important vertical
markets.

The Microarray Market Opportunity

     Microarraying slides were our first commercial biomedical products. Our
products derive their advantages from OptiChem surface coatings. OptiChem can
reduce background interference from materials in the analytical sample. Examples
of materials that OptiChem sheds and that typically interfere with conventional
surfaces include microbes, blood cells, blood and serum proteins, sticky
proteins in cell culture lysates, and unbound dyes that remain after labeling
test samples. Non-specific binding (also referred to as "adsorption" or
"fouling") of such materials is a dominant noise factor that limits the
sensitivity of bio-analytical assays.

     Microarrays typically consist of a microscopic grid of thousands of spots
of a test chemistry on a glass slide. Each spot is made of a different variation
of a test probe molecule, such as a unique short length of synthetic DNA that
has a particular gene sequence. The researcher exposes a sample, such as
extracts from a cell culture or blood, to the microarray. After incubation,
washing and labeling, a computerized scanner measures the amount of dye or label
on each spot. The researcher can then compare the array pattern between two
different samples, such as a tumor biopsy against normal tissue.

     Microarrays are important because they allow the researcher to determine
which genes or biochemical pathways become more or less active during a disease
or after exposure to a new drug candidate molecule. They allow the scientist to
conduct thousands of analytical experiments at one time. This can reveal clues
to disease processes or help determine whether a potential new drug has the
expected biochemical effects in living tissues.

     We decided to enter the microarray market because it has been in existence
long enough to prove its potential application in clinical diagnostics, but we
believe that it still has most of its growth ahead of it. Although the current
research market is attractive in itself, we believe that emerging market
segments in drug discovery and molecular diagnostics have much larger potential.
In particular, we believe that research trends suggest that new array-based
methods for cancer diagnostics may drive market growth. In addition, we believe
that microarray technology has reached a crucial juncture, and that our unique
technology has the potential to resolve critical issues, such as reducing
complicated steps for sample preparation, that now retard the next phase of
market evolution. Customer experience with OptArray slides confirms our beliefs
about the nature of OptiChem's superiority in bio-analytical assays such as gene
arrays and protein arrays.

     On November 4, 2004, the Company signed an exclusive two year manufacturing
and marketing license with SCHOTT Jenaer Glas GmbH of Jena, Germany ("SCHOTT").
SCHOTT is a leading glass manufacturer in Europe. SCHOTT formed a division
(Nexterion) in 2002 to enter the microarray market. Since then they have
captured a share of the global microarray slide market selling several different
formulas of coated slides. The license includes the global right to manufacturer
and sell standard microarray slides using OptiChem amine-reactive coatings
(Slide H).

     Under the license, Accelr8 supplied SCHOTT with products manufactured by
Accelr8 until SCHOTT's new production facility achieved its production
validation requirements. SCHOTT obtained the right for a 2-year exclusive global
manufacturing and marketing license for OptiChem-coated microarraying products,
and the option for a 1-year extension. Accelr8 was SCHOTT's sole supplier of

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permeable hydrogel coatings for microarraying slides during the term of the
Supply Agreement. Accelr8 also provided training to facilitate the transition to
the new SCHOTT manufacturing facility. In addition, SCHOTT also acquired an
option for a technology transfer license for multiplexed microarraying plates in
the microtiter format that must be exercised by December 31, 2005.

     On April 25, 2005 the companies agreed to increase the original supply
agreement for Accelr8 to produce an additional 5,000 amine-reactive slides for
SCHOTT.

     On June 2, 2005 the Company signed a second supply agreement with SCHOTT
for OptiChem-streptavidin coated microarraying slides (Slide HS). Accelr8 had
been manufacturing the streptavidin slides for SCHOTT since October 2004. Under
the new agreement Accelr8 extended production through December 2005. SCHOTT also
has a right during 2005 to enter into negotiations for an exclusive
manufacturing and distribution license, similar to the Slide H agreement signed
November 4, 2004. On September 27, 2005, SCHOTT also provided written
notification with the Amended Supply Agreement that it intends to exercise its
exclusive right to negotiate an exclusive license for the application of the
Company's OptiChem Streptavidin coated microarrying slides.

     In the fiscal year ended July 31, 2005 Accelr8 received revenues of
$394,045 from SCHOTT (including license fees, option fees and product sales).

     Going forward, we intend to continue to selectively pursue additional
high-potential opportunities in the microarray market. We believe that OptiChem
coatings may have opportunities in microbial biofilm inhibition, (as it applies
to stents and implants) pharmaceutical packaging, and other areas that require
exceptional anti-adsorptive surface coatings.

Competition

     If the production of the BACcelr8r is successful, it will enter a market
niche whose constituent hospital laboratories now use automated bacterial
culturing, identification, and antibiotic susceptibility testing systems.
Leading suppliers of such systems include Becton Dickinson (NYSE: BDX), Dade
Behring (NASDAQ: DADE), Trek Diagnostics (private), and bioMerieux (France).
These products provide broad-based culturing and analysis of a wide variety of
bacteria. In contrast, we intend to position the BACcelr8r as a disease-specific
analysis and monitoring system for critically ill patients using small and
specific subset of bacterial pathogens.

     We believe that we will not need to displace installed culturing systems in
order to sell the BACcelr8r. We have identified specific diseases for which
there is an urgent clinical need for rapid detection. These diseases also result
in major hospital costs that we believe can only be reduced, in the absence of
effective prevention, by a product that performs as we intend the BACcelr8r to
perform (results in eight hours or less).

     Identified potential future competitors include companies who are
attempting to develop diagnostic platforms based on gene-based analyses such as
PCR (polymerase chain reaction or gene amplification).

     Approximately 20 companies around the world sell activated slides for use
in microarray printing. However, only a few of these produce high-performance
products that we view as competing with OptiChem coated microarraying
substrates.

     Although Corning (NYSE:GLW) commands market leadership in activated
microarray slides, we do not compete directly with Corning. OptArray targets the
emerging need for high performance microarraying slides whereas Corning and
others produce lower-cost products primarily for first-generation DNA expression
arraying. Other companies that have similar products include TeleChem
International (private), Fisher Scientific (NYSE:FSH), and SCHOTT (Germany).

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     General Electric (NYSE: GE) markets activated slides and manufactured
microarrays under the CodeLink(tm) brand. The coating on CodeLink slides is a
hydrogel polymer that competes with OptiChem coated slides. However, we view GE
as a potential customer and their supplier, SurModics Inc. (NASDAQ: SRDX), as a
competitor in surface coatings.

Accelr8's Business Models

     We intend to offer licenses to assay and instrumentation manufacturers. We
intend to offer such licenses in return for an up-front licensing fee plus a
royalty on the net sales price for finished products that contain our licensed
assets, subject to annual minimum royalties.

     Before we commit significant development effort to integrate our
technologies into a customer's products and processes, we intend to require the
customer to fund our non-recurring development costs. This customary joint
development phase should help us to preserve a portion of our cash assets and
help to qualify the customer's interest. However, there can be no assurance that
we will enter into a joint development agreement with any of our customers.

     We continue to evaluate the potential to produce fully integrated systems
for sale to end users in various market niches. The projected potential
consumption for coated substrates makes these niches attractive. Based upon our
perception of the high value to customers and low projected production costs, we
believe that this type of business model has attractive margin potential.
However, there can be no assurance that we will be successful in increasing the
demand for any of our products.

Customers

     During the fiscal year ended July 31, 2005, total revenues were $502,110,
of which $336,610 (67.0%) were OptiChem revenues. Of the total OptiChem
revenues, $318,545 (94.6%) were to SCHOTT and $11,775 (3.5%) were to another
customer. We continue to evaluate products and the sale of products used in the
internal development of other companies. We are still engaged in research and
development with respect to the OptiChem, and Baccelr8r technologies. We believe
that the selling cycle (to a customer) for a product such as OptiChem will
average about nine to twelve months, because of the need to integrate our
products into the customer's production processes.

     We continue to evaluate potential new products and the sale of products
used in the internal development of other companies.

Marketing and Sales

We currently market our technologies to potential industrial customers through
five primary routes:

     o    Public presentations at scientific symposia attended by key scientific
          staff and research and development decision makers from targeted
          companies and institutions.

     o    Invited presentations at targeted companies by our own scientists or
          consultants.

     o    Telephone calls, emails, express letters, and personal visits to key
          executives, business development managers, marketing managers, and
          research and development managers at targeted companies.

     o    Our web site (www.accelr8.com), the content of which is technical in
          nature and targeted to scientists within prospective accounts.

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     o    Exclusive and non-exclusive agreements with well established
          distributors and manufacturers who have demonstrated effective
          marketing and have existing sales channels.

     We believe that the "executive selling" process helps to assure that
high-quality, effective information is presented directly to individuals who
have decision making authority or who have strong influence over decisions to
adopt novel technologies in their business's product development programs.

     We intend to continue to expand our exposure by means of research papers in
technical and professional journals, feature articles in the trade press, and
advertising.

Operations

     We own all of our laboratory equipment. We lease approximately 6,400 square
feet of laboratory and administrative space. Within the laboratory facility we
constructed a cleanroom pilot production operation. We believe the facility has
adequate capacity to implement the current product development plan.

     We have identified secondary sources for all materials used in OptiChem
formulation, and have qualified multiple sources for the most critical
constituent (inputs).

     We conduct an aggressive research and development program to expand our
intellectual property portfolio and to adapt our licensable technologies to
specific applications. Research and development programs include new physical
coating methods for production of different substrate formats, additional
methods for linking coatings to base materials, and additional functionalization
for new applications. During the years ended July 31, 2005 and 2004, we spent
approximately $1,304,888 and $554,416, respectively, on research and development
activities.

     Instrumentation development requires certain components that are
custom-fabricated to our specifications. Such components include printed circuit
boards for controller electronics, optical components such as custom lenses,
injection-molded plastic components, and machined mechanical components. In all
applicable cases, we will own the production tooling and believe that we will be
able to qualify secondary sources. We plan to maintain inventory levels
sufficient to bridge second-source response times and include an adequate safety
factor.

     We do not directly employ product development engineers but contract with
independent engineering firms that have experience in each necessary technical
discipline. In all cases these organizations pre-assign all new intellectual
property to Accelr8 without future obligations by Accelr8. We retain full
ownership without needing a license or payment of royalties.

     The lead project engineering firm has been in the medical device
development business since the late 1980s. They are designing the instrument and
system software. This organization has extensive experience in designing medical
devices under FDA regulations and ISO requirements. An executive in this
organization has overall responsibility to supervise the other engineering
teams. Accelr8 technical staff and executives directly coordinate these
organizations and participate directly in technical project execution.

     Another specialized software organization is developing image analysis
algorithms and tools. The lead firm will use the methods developed by these
specialists to integrate into the final product.

     Another contract engineering firm specializes in medical plastics,
including injection molding. These engineers have experience in designing
disposable, low-cost medical diagnostic products, designed for high volume
manufacturability. This firm subcontracts with another specialized organization

                                       11

<PAGE>


for laminate design and processing. This subcontractor also has experience in
developing high-performance disposable biomedical devices for NASA and
industrial clients. Finally, we also contract with an organization that
specializes in microfluidic analysis and design. This organization works
directly with the plastics engineering firm to originate and analyze critical
flow components contained within the single-use cassette.

     In addition we are developing custom antibodies for species identification
and other assays. Commercial antibody sources do not exist for some of the
species contained in our panels. In other cases commercial sources cannot
provide antibodies that meet our criteria for performance or production.
Management believes that custom antibodies derived from this development program
will add significant asset value and competitive advantages. In this program we
own the antibodies and any intellectual property that may emerge as a result of
the contracts.

     We have sold a manufacturing and marketing license to SCHOTT for the
production of microarray slides (Slide H). We continue to use our own cleanroom
pilot operation for ongoing product development and process engineering. As we
approach commercialization for the BACcelr8r, we plan to engage experienced
outsource vendors to produce finished goods thus avoiding costly investment for
a manufacturing facility.

Intellectual Property

     We rely on a combination of patent, copyright, trademark and trade secret
laws, employee and third party non-disclosure agreements, license agreements and
other intellectual property protection methods to protect our proprietary
rights. We are committed to aggressively develop a continuing stream of
intellectual property and to defend our position in key technologies.

     We have a number of issued patents for technology acquired from DDx and
have filed additional United States and international patent applications.

     Accelr8's first patent on the OptiChem technology, U.S. Patent No.
6,844,028 titled "Functional Surface Coating" issued on January 18, 2005. The
patent specification covers the core OptiChem technology. The United States
Patent Office issued a Notice of Allowance for the second in a series of
OptiChem patents in May 2005. Additional OptiChem United States and
international patent filings are in prosecution.

     Accelr8 broadened the scope of its instrument patent claims by filing
additional provisional patent applications during the 2005 fiscal year.
Management believes that these filings address many of the core concepts of QM
and include additional instrumentation and specimen preparation inventions
related to the BACcelr8r system.

     There can be no assurance that third parties will not assert infringement
or other claims against us with respect to any existing or future products. We
cannot assure you that licenses would be available if any of our technology was
successfully challenged by a third party, or if it became desirable to use any
third-party technology to enhance the Company's products. Litigation to protect
our proprietary information or to determine the validity of any third-party
claims could result in a significant expense to us and divert the efforts of our
technical and management personnel, whether or not such litigation is determined
in our favor.

     While we have no knowledge that we are infringing upon the proprietary
rights of any third party, there can be no assurance that such claims will not
be asserted in the future with respect to existing or future products. Any such
assertion by a third party could require us to pay royalties, to participate in
costly litigation and defend licensees in any such suit pursuant to
indemnification agreements, or to refrain from selling an alleged infringing
product or service.

                                       12

<PAGE>


     The Company has secured or established trademarks for:

          o    BACcelr8r;
          o    OptArray(TM);
          o    OptiChem(R);
          o    OptiPlate(TM);
          o    QuanDx(TM); and
          o    YoDx(TM) and
          o    Quantum Microbiology(TM).

Employees and Consultants

     We have fourteen full-time employees and contracts with five consultants.
We have not entered into any collective bargaining agreements.

Factors That May Affect Future Results

     Dependence On Key Employees. Our success depends to a significant extent
upon a number of key management and technical personnel, the loss of one or more
of whom could have a material adverse effect on our results of operations. We
carry key man life insurance in the amount of $5 million on Thomas V. Geimer.
The Board of Directors has adopted resolutions under which one-half of the
proceeds of any such insurance will be dedicated to a beneficiary designated by
the insured. There can be no assurance that the proceeds from such life
insurance would be sufficient to compensate us for the loss of Mr. Geimer, and
these policies do not provide any benefits to the Company if Mr. Geimer becomes
disabled or is otherwise unable to render services to the Company. Further, the
loss of David Howson as President of the Company may have a significant adverse
effect upon the Company and its business. We believe that our continued success
will depend in large part upon our ability to attract and retain highly skilled
technical, managerial, sales and marketing personnel. There can be no assurance
that we will be successful in attracting and retaining the personnel we require
to develop and market new and enhanced products and to conduct our operations
successfully.

     Need To Develop Market For Products. We have received only nominal revenue
from sales based on products using the new OptiChem technology. Our competitors
manufacture and market products that are similar to ours. Our principal
competitors and the areas in which they compete with us are described more fully
in "Competition." While we have received nominal revenues from sales, there is
no assurance that we will be successful in marketing our products.

     Our Success Depends Partly On Our Ability To Successfully Introduce New
Products. In a market primarily driven by the need for innovative products, our
revenue growth will depend on overcoming various technological challenges to
successfully introduce new products into the marketplace in a timely manner. Our
technology requires significant knowledge and experience in biochemistry. In
addition, we must continue to develop new applications for our existing
technologies. Market acceptance of these products will depend on many factors,
including, but not limited to, demonstrating that our technologies are superior
to other technologies and products that are currently available or may become
available in the future.

     If we are unable to overcome these technological challenges, or even if we
experience difficulties or delays, we may be unable to attract additional
customers for our products, which would seriously harm our business and future
growth prospects.

     If We Are Unable To Effectively Protect Our Intellectual Property, We May
Be Unable To Prevent Infringement. Our success depends in part on our ability to
obtain and maintain patent protection for the technology underlying our

                                       13

<PAGE>


products, both in the United States and in other countries. We cannot assure you
that any of the presently pending or future patent applications will result in
issued patents, or that any patents issued to us or licensed by us will not be
challenged, invalidated or held unenforceable. Further, we cannot guarantee that
any patents issued to us will provide us with a significant competitive
advantage.

     If we fail to successfully enforce our proprietary technology or otherwise
maintain the proprietary nature of our intellectual property with respect to our
significant current and proposed products, our competitive position and sales
could suffer or we may be unable to increase sales.

     Notwithstanding our efforts to protect our intellectual property, our
competitors may independently develop similar or alternative technologies or
products that are equal to or superior to our technology and products without
infringing on any of our intellectual property rights or design around our
proprietary technologies. If customers prefer these alternative technologies to
our technology, sales could be adversely affected.

     Our Products Could Infringe On The Intellectual Property Rights Of Others.
Due to the very significant number of U.S. and foreign patents issued to, and
other intellectual property rights owned by entities operating in the industry
in which we operate, we believe that there is a significant risk of litigation
arising from infringement of these patents and other rights. Third parties may
assert infringement or other intellectual property claims against us or our
licensees. We may have to pay substantial damages, including treble damages, for
past infringement if it is ultimately determined that our products infringe on a
third party's proprietary rights. In addition, even if such claims are without
merit, defending a lawsuit may result in substantial expense to us and divert
the efforts of our technical and management personnel.

     We may also be subject to significant damages or injunctions against
development and sale of some of our products, which could have a material
adverse effect on our future revenues. Furthermore, claims of intellectual
property infringement may require us to enter into royalty or license agreements
with third parties, and we may be unable to obtain royalty or license agreements
on commercially acceptable terms, if at all.

     Third Parties May Seek To Challenge, Invalidate Or Circumvent Issued
Patents Owned By Or Licensed To Us Or Claim That Our Products And Operations
Infringe Their Patent Or Other Intellectual Property Rights. In addition to our
patents, we possess an array of unpatented proprietary technology and know-how
and we license intellectual property rights to and from third parties. The
measures that we employ to protect this technology and these rights may not be
adequate. Moreover, in some cases, the licensor can terminate a license or
convert it to a non-exclusive arrangement if we fail to meet specified
performance targets.

     We may incur significant expense in any legal proceedings to protect our
proprietary rights or to defend infringement claims by third parties. In
addition, claims of third parties against us could result in awards of
substantial damages or court orders that could effectively prevent us from
manufacturing, using, importing or selling our products in the United States or
abroad.

     Competition. Many of our competitors have greater financial, manufacturing,
marketing and sales resources than we do. In addition, some of our competitors
may, individually or together with companies affiliated with them, have greater
human and scientific resources than we do. Our competitors could develop
technologies and methods for materials that render our technologies and
methodologies less competitive. Accordingly, if new competitors introduce new
materials that are more cost effective than our technologies, we could
experience poor sales, revenues and operating results.

                                       14
<PAGE>


     Ability To Respond To Technological Change. Our future success will depend
significantly on our ability to enhance our current products and develop or
acquire and market new products that keep pace with technological developments
and evolving industry standards as well as respond to changes in customer needs.
There can be no assurance that we will be successful in developing or acquiring
product enhancements or new products to address changing technologies and
customer requirements adequately, that we can introduce such products on a
timely basis or that any such products or enhancements will be successful in the
marketplace. Our delay or failure to develop or acquire technological
improvements or to adapt our products to technological change would have a
material adverse effect on our business, results of operations and financial
condition.

     Control By Management. At October 12, 2005, our officers and directors
owned or controlled of record approximately 944,950 or 9.48% of the outstanding
shares of our Common Stock. If they exercise all of the options that they
currently hold, they will own 1,629,950 or 15.29% of the then outstanding shares
of our Common Stock. Due to their stock ownership, the officers, directors and
key employees may be in a position to elect the Board of Directors and to
control the business and affairs of the Company, including certain significant
corporate actions such as acquisitions, the sale or purchase of assets and the
issuance and sale of the Company's securities.

     Shares Eligible For Future Sale. As of July 31, 2005, we had reserved
1,500,000 shares of Common Stock for issuance upon exercise of options which
have been or may be granted pursuant to our stock option plans. As of July 31,
2005, 477,500 options had been granted pursuant to the Qualified Plan with 2,500
of these options exercised, 250,000 options has been granted pursuant to the
Non-Qualified Plan with 75,000 of this options exercised and 320,000 options
have been granted pursuant to the 2004 Omnibus Plan with none of these options
exercised. Further, as of October 12, 2005, there were 1,103,405 outstanding
shares of our Common Stock, not held by our officers, directors that are
restricted securities as that term is defined in Rule 144 under the Securities
Act. Further, as of October 12, 2005, there were apparoximately 1,093,405 shares
that are deemed restricted securities whose restrictions have lapsed and may be
sold as unrestricted securities. Although the Securities Act and Rule 144 place
certain prohibitions on the sale of restricted securities, restricted securities
may be sold into the public market under certain conditions.

     The 1,129,110 warrants exercised by Mr. Geimer ("Geimer Warrants") were
exercised at $0.24 per share on October 14, 1997, and contributed to a Rabbi
Trust. Under the terms of the Rabbi Trust, we will hold the shares in the trust,
and carry them as treasury stock. The Rabbi Trust provides that upon Mr.
Geimer's death, disability or termination of his employment, the shares will be
released ratably over the subsequent ten (10) years, unless the Board of
Directors determines otherwise. See Note 8 to the Financial Statements for
further information. Sales of Common Stock underlying Plan Options may adversely
affect the price of the Common Stock.

     The Loss Of One Or More Of Our Major Clients Could Significantly Reduce Our
Revenue. During the fiscal year ended July 31, 2005, total revenues from SCHOTT
were $394,045, 78.5% of revenues. Of this amount $318,545 were OptiChem
revenues, $50,000 was a license fee and $25,500 was for option fees. During the
fiscal year ended July 31, 2004, sales to SCHOTT of OptiChem revenues were
$65,166 (54.9%) and to SomaLogic in the amount of $35,200 (29.7%) representing
84.6% of our total revenues. There can be no assurance that revenue from any
customer will continue at their historical levels. Loss of one or more of our
current clients, particularly the clients listed above, could have a material
adverse effect on our business, financial condition and results of operations.
If we cannot broaden our customer base, we will continue to depend on a few
clients for the majority of our revenue.

     We Use Hazardous Materials In Some Of Our Research, Development And
Manufacturing Processes. Our research activities sometimes involve the
controlled use of various hazardous materials. Although we believe that our
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. We
could be held liable for any damages that might result from any accident

                                       15

<PAGE>


involving such materials. Any such liability could have a material adverse
effect on our business, financial condition and results of operations.

     We Have A Single Manufacturing Facility And We May Lose Revenue And Be
Unable To Maintain Our Client Relationships If We Lose Our Production Facility.
We manufacture all of the products we sell in our existing production lab in
Denver, Colorado. We currently can manufacture approximately 4,000 coated slides
per month running one shift per five-day work week. If our production facility
becomes incapable of manufacturing products for any reason, we may be unable to
meet production requirements, we may lose revenue and we may not be able to
maintain our relationships with our customers. Without our existing production
facility, we would have no other means of manufacturing products incorporating
our coating technologies until we were able to restore the manufacturing
capability at our facility or develop an alternative manufacturing facility.
Although we carry business interruption insurance to cover lost revenue and
profits in an amount we consider adequate, this insurance does not cover all
possible situations. In addition, our business interruption insurance would not
compensate us for the loss of opportunity and potential adverse impact on
relations with our existing licensees resulting from our inability to produce
products for them.

     Changes In Governmental Regulations May Reduce Demand For Our Products Or
Increase Our Expenses. We compete in markets in which we or our customers must
comply with federal, state, local and foreign regulations, such as
environmental, health and safety and food and drug regulations. We develop,
configure and market our products to meet customer needs created by these
regulations. Any significant change in these regulations could reduce demand for
our products.

     Our Results Of Operations Will Be Adversely Affected If We Fail To Realize
The Full Value Of Our Intangible Assets. As of July 31, 2005, our total assets
included $3,878,969 of net intangible assets. Net intangible assets consist
principally of costs associated with securing patent rights, trademark rights
and technology licenses, net of accumulated amortization. These assets have
historically been amortized on a straight-line basis over their estimated useful
lives. Intangible assets to be held and used by the Company are reviewed for
impairment whenever events or circumstances indicate that the carrying amount of
the asset may not be recoverable. We continuously evaluate the recoverability of
these items based on estimated future cash flows from and estimated fair value
of such assets, and provide for impairment if such undiscounted cash flows are
insufficient to recover the carrying amount of the asset. During the fiscal year
ended July 31, 2004, the Company recorded an impairment of $10,316 for trademark
abandonment. Future impairment testing may result in additional intangible asset
write-offs, which could adversely affect our financial condition and results of
operations.

     Our business strategy approach may be adversely affected by potential
healthcare reform. Our vision is to develop and commercialize an innovative,
integrated system for rapid identification of bacterial antibiotic resistance in
critically ill patients. Healthcare reform and the growth of managed care
organizations have been considerable forces in the diagnostics industry. These
forces continue to place constraints on the levels of overall pricing and thus
could have a material adverse effect on our future profit margins of our
products. Such continuing changes in the United States healthcare market could
also force us to alter our approach to selling, marketing, distributing and
servicing our customer base. In and outside the United States, changes to
government reimbursement policies could reduce the funding that healthcare
service providers have available for diagnostic product expenditures, which
could have a material adverse impact on our future sales and /or profit margin.

     We make significant investments in research and development, but there is
no guarantee that any of these investments will ultimately result in a
commercial product that will generate revenues. The BACcelr8r will integrate
many of our component systems and processes. For the year ended July 31, 2005,
we spent $1,304,888 on research and development expenses. Notwithstanding these
investments, there can be no assurance that the BACcelr8r will be successful, or

                                       16

<PAGE>


even if it is successful will be accepted in the marketplace. Further, we might
also encounter substantial delays in getting products to market in a timely
fashion.

     Changes in our business strategy or plans may adversely affect our
operating results and financial condition. If our business strategy or plans
change, whether in response to changes in economic conditions or developments in
the diagnostics industry, or otherwise, we may be required to expend
significantly more resources than planned to develop the BACcelr8r or other new
products. The expense of such change could adversely affect our operating
results and financial condition.

     Compliance costs with recently enacted changes in the securities laws and
regulations pursuant to the Sarbanes-Oxley Act of 2002 will increase our costs.
The Sarbanes-Oxley Act of 2002 that became law in July 2002 has required changes
in some of our corporate governance, securities disclosure, accounting and
compliance practices. In response to the requirements of that act, the
Securities and Exchange Commission and the American Stock Exchange have
promulgated new rules on a variety of subjects. Compliance with these new rules
as well as the Sarbanes-Oxley Act of 2002 has increased our legal, financial and
accounting costs, and we expect the cost of compliance with these new rules to
continue to increase and to be permanent. Further, the new rules may increase
the expenses associated with our director and officer liability insurance.

     Our stock price has been volatile and may continue to be volatile; Dividend
Policy. The trading price of our common stock has been, and is likely to
continue to be, highly volatile, in large part attributable to developments and
circumstances related to factors identified in "Forward-looking Statements" and
"Risk Factors." The market value of your investment in our common stock may rise
or fall sharply at any time because of this volatility, and also because of
significant short positions taken by investors from time to time in our stock.
During the fiscal year ended July 31, 2005, the closing sale price for our
common stock ranged from $3.40 to $1.97 per share. The market prices for
securities of medical technology companies historically have been highly
volatile, and the market has experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. We do not intend to pay any cash dividends on our Common Stock in the
foreseeable future.

Glossary

Antibody: a specialized protein (immunoglobulin) produced by the immune response
that binds to a particular molecular surface that has previously been presented
to certain cells in the organism's blood. The end-product of the "humoral"
component of the immune response. Key component of immunoassays detecting as the
analyte-specific detection agent.

Antigen: the material used to stimulate immune antibody production in an
organism.

Assay, Qualitative: a chemical test in which the result is expressed as the
presence or absence of an analyte. Also referred to as "detection," as opposed
to measuring the amount of material.

Assay, Quantitative: a test in which the result is expressed as the quantity of
analyte in a sample. Quantitative assays may be used to determine whether the
amount of analyte is above or below a "cut-point" that distinguishes an
acceptable level of the analyte, such as a food pathogen, from an unacceptable
level.

Culturing (Bacterial): the analytical process of growing bacteria from a patient
specimen (blood, sputum, etc.) to a quantity suitable for isolation and
analysis.

DNA: the nucleic acid biomolecules that carry an organism's genetic code. The
famous "double helix" molecular model of Watson and Crick.

Gene: a sequence of DNA or RNA that produces a functional protein product when
translated by the normal biosynthetic route.

                                       17

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Genomics: the study, including sequencing, of molecules that carry an organism's
genetic code (nucleic acids, DNA and RNA).

Genotype: the DNA gene sequence makeup that distinguishes one type of organism
from another. Genotype differences may or may not directly correlate with
phenotypes (see definition below).

Immunoassay: any type of biochemical assay that uses antigen-antibody affinity
as the assay basis of selection and detection.

Isolation (Bacterial): the technique of growing bacterial cultures on selective
media in such a way that only particular species grow successfully, thereby
isolating colonies of the species for further analysis.

Microarray: a regular geometric array (matrix or grid pattern) of individual
reactive chemical probes affixed to a physical substrate such as a microscope
slide. Used in assays to conduct thousands of analyses at one time on sample
materials presented to the microarray. The high-density evolution of the
microtiter plate.

Microtiter Plate: a multi-well plate (typically 96 wells) of standard dimensions
in which individual reactions occur near-simultaneously with different reagents.
Analyzed visually or by automated optical plate readers. Currently the most
widely-used standard laboratory assay format.

Nucleic Acid: DNA (deoxyribo-nucleic acid) or RNA (ribo-nucleic acid). Polymeric
chains of nucleotides whose particular sequence constitutes an organism's
genetic code (DNA and genomic RNA) or that participate in the biosynthesis of
new protein molecules (other types of RNA such as messenger RNA, transfer RNA,
and ribosomal RNA).

Pathogen: an infectious organism (bacteria, viruses, molds and fungi, prions)
that when invading a host causes a disease. Pathogens may be transmitted through
food, water, air, and/or contact with infected individuals or their biological
fluids.

Phenotype: for microorganisms, the functional responses or observable
characteristics that differentiate one set of organisms from another within the
same species. The basis for strain differentiation based on observable behavior
or properties other than those expressed in the genotype.

Protein: biological polymeric macromolecules formed by long chains of amino
acids (twenty in humans) and which provide the mechanism for cellular physiology
and metabolism. All life functions are carried out through the mediation of
proteins (typically enzymes).

Sensitivity: the smallest quantity of analyte that the assay can detect. Same as
"Limit Of Detection." Statistically, the proportion of false negatives reported
for a population sample.

Strain (Bacterial): variants or phenotypes of a bacterial species that exhibit
significant characteristics that allow discrimination of one strain from
another. In clinical application usually distinguished on the basis of disease
severity, toxic products, antibiotic resistance, and other medically relevant
properties.

Superinfection: a second infection that occurs after treatment has begun for a
diagnosed infection.

Surface Chemistry: the chemistry of materials that provide a barrier or contact
surface. In the context of biochemical assays, the chemistry of all exposed
surface area that may come into contact with assay reagents.

Ventilator Associated Pneumonia (VAP): a version of hospital-acquired pneumonia
whose symptoms first appear at least 48 hours after starting mechanical
ventilation.

Item 2. Description of Property.

     We lease approximately 6,400 square feet of office and laboratory space at
7000 North Broadway, Building 3-307, Denver, Colorado 80221. The monthly rent is
$4,970 per month.

                                       18
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Item 3.   Legal Proceedings

     Not Applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

     No matters were submitted by the Company to a vote of our security holders
through the solicitation of proxies or otherwise, during the fourth quarter of
the fiscal year covered by this Annual Report.

PART II

Item 5.  Market For Common Equity and Related Stockholder Matters

     From November 21, 2000 to October 8, 2003, the Company's common stock
traded on the NASDAQ Electronic Bulletin Board. On October 9, 2003, the
Company's common stock began trading on the American Stock Exchange under the
trading symbol AXK.

     The table set forth below presents the range, of the high and the low sales
price per share of Common Stock on a quarterly basis.

         Quarter Ended                        High              Low
         -------------                        ----              ---

         Fiscal 2005
         October 31, 2004                   $ 3.40           $ 2.30
         January 31, 2005                     3.35             1.99
         April 30, 2005                       2.45             1.97
         July 31, 2005                        2.35             2.00

         Fiscal 2004
         October 31, 2003                    $4.80            $2.25
         January 31, 2004                     3.66             2.10
         April 30, 2004                       3.30             2.35
         July 31, 2004                        3.17             2.10


     The closing price for our Common Stock on October 5, 2005 was $3.14. On
October 12, 2005, the Company had approximately 417 shareholders of record,
which does not include shareholders whose shares are held in street or nominee
names. The Company believes that there are approximately 1,435 beneficial owners
of its Common Stock.

     Holders of Common Stock are entitled to receive dividends as may be
declared by the Board of Directors out of funds legally available therefore. To
date, no dividends have been declared by the Board of Directors, nor does the
Board of Directors anticipate declaring and paying cash dividends in the
foreseeable future.

                                       19

<PAGE>


Item 6.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Overview

     On January 18, 2001, Accelr8 purchased the OpTest technology assets from
DDx and commenced investment in development and optimization of OpTest's surface
chemistry (OptiChem) and quantitative instrument (QuanDx). Our proprietary
surface chemistry and its quantitative instruments support rapid assessment of
medical diagnostics, food-borne pathogens, water-borne pathogens and bio-warfare
assessments. The Company sells advanced microarray slides coated with its
proprietary OptiChem activated surface chemistry for use in academic research,
drug discovery and molecular diagnostics. This surface coating has the ability
to shed sticky biomolecules that interfere with bio-analytical assays such as
microarrays and immunoassays. This property substantially improves analytical
performance by enabling higher sensitivity, greater reproducibility, and higher
throughput by virtue of simplified application methods.

     On November 24, 2004, the Company entered into a worldwide exclusive
manufacturing and marketing license agreement (the "License Agreement") with
SCHOTT Jenaer Glas GmbH ("SCHOTT"). The Company also entered into a supply
agreement (the "Supply Agreement") with SCHOTT for OptiChem coated
amine-reactive slides (Slide H) manufactured by Accelr8.

     Pursuant to the License Agreement SCHOTT paid the Company a non-refundable
fee of $100,000, of which $50,000 was credited against future royalties. An
additional $15,000 in deferred revenue has been recorded for training supplied
to SCHOTT. During the 2-year term of the License Agreement SCHOTT agreed to pay
Accelr8 a royalty payment equal to 6% of net sales of products licensed under
the License Agreement. If the total net sales during the initial 2-year term
equal or exceed, $1,125,000, then the total royalty payable by SCHOTT for the
initial term shall be a flat fee of $90,000. An optional 1-year extension may be
exercised by SCHOTT by payment of a $90,000 upfront renewal fee.

     Pursuant to the Supply Agreement, the Company supplied SCHOTT with 10,000
OptiChem coated microarraying slides, including 1,000 slides purchased prior to
the execution of the Supply Agreement, at a price of $14.00 each. The Supply
Agreement also includes an option to SCHOTT until December 31, 2005 to negotiate
an exclusive license for the application of OptiChem coatings on multi-well
microtiter plates. In return, SCHOTT provided 7,500 glass substrates to Accelr8
at no charge. The option is valued at $12,750 and has been recorded as an option
fee. The supply agreement was amended on April 25, 2005 to include the purchase
of an additional 5,000 slides through July 15, 2005 under the same terms.

     On June 2, 2005, we entered into a second supply agreement (the "Second
Supply Agreement") with SCHOTT Jenaer Glas GmbH ("SCHOTT"). Pursuant to the
Second Supply Agreement, we will supply a minimum of 5,000 OptArray Streptavidin
coated microarrying slides (Slide HS) to SCHOTT on a non-exclusive basis at a
price of $20.82 each for the first 1,000 slides and $17.15 for the remaining
slides purchased under the Second Supply Agreement. The Second Supply Agreement
with SCHOTT expires on December 31, 2005. We also granted an option to SCHOTT to
negotiate for a non-exclusive right to manufacture and sell, up to 12,500 glass
slides, from January 1, 2006 to December 31, 2006. In return for this right,
SCHOTT agreed to provide 7,500 glass substrates to Accelr8 at no charge. The
value of the slides is $12,750 and has been recorded as option revenue. On
September 27, 2005, the Company and SCHOTT entered into an amendment (the
"Amended Supply Agreement") to the Supply Agreement pursuant to which SCHOTT
exercised the worldwide non-exclusive right to make, use, sell, offer to sell,
import and export 12,500 Slide HS from January 1, 2006 to December 31, 2006. In
connection with the exercise of this right, SCHOTT will pay the Company $15,000
for training on manufacturing of Slide HS and the Company will receive an 8%
royalty of SCHOTT's (or its affiliates) net sales of Slide HS. On September 27,
2005, SCHOTT provided notice that it intends to exercise its right to negotiate
an exclusive license for the application of the Company's OptiChem streptavidin
coated microarrying slides.

     In fiscal 2006 we intend to complete technical studies on materials and
processes to be used in the BACcelr8r system. For a complete description of the
research and development we intend to perform during fiscal 2006, see "Item 1.

                                       20

<PAGE>


Description of Business." We also intend to begin BACcelr8r product design and
development for Version 0.4 in fiscal 2006. In addition, we expect to conduct
further custom OptiChem coating development in projects funded by industrial
customers.

Selected Financial Data

     The following selected financial data should be read in conjunction with
the financial statements and related notes thereto appearing elsewhere in this
Form 10-KSB. The selected financial data as of July 31, 2005 and 2004 and for
each of the two years in the period ended July 31, 2005 have been derived from
our financial statements which have been audited by our independent auditors and
included elsewhere in this Form 10-KSB. The selected financial data provided
below is not necessarily indicative of our future results of operations or
financial performance.


                                                          Year Ended July 31,
Statement of Operations Data:                          2005              2004
                                                       ----              ----
                                                           (In thousands,
                                                       except per share data)

Total Revenue                                             502         $    119
                                                    ---------         ---------

Loss from continuing operations                        (2,091)          (1,699)
Gain on sale of discontinued operations                     0              621
Income from discontinued operations                         0              168
Net loss                                               (2,091)            (909)
Weighted average shares outstanding                 9,961,210        9,961,210

Basic and diluted net loss per share
Continuing Operations                              $    (0.21)       $   (0.17)
Discontinued Operations                                     0        $     .08
                                                    ---------        ---------
                                                   $    (0.21)       $   (0.09)

Balance Sheet Data:                                      2005          2004
                                                         ----          ----

Working capital                                    $    5,634        $   7,257
Current assets                                          6,131            7,504
Current liabilities                                       497              247
Total assets                                           11,008           12,725
Total liabilities                                       1,340              988
Shareholders' equity                                    9,668           11,737

                                       21

<PAGE>


Results of Operations

     The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the Company's Statements
of Operations:

     Fiscal year ended July 31,                            2005         2004
                                                           ----         ----
     Total revenues from continuing operations             100%         100%
     Research and development                             (259)        (467)
     General and administrative                           (185)        (758)
     Amortization                                          (47)        (198)
     Cost of sales                                         (31)         (55)
     Marketing and sales                                   (12)         (67)
     Depreciation                                          (14)         (41)
     Abandoned trademark                                     0           (9)
     Other (expense) income, net                            33           62
     Loss from continuing operations                      (416)      (1,432)
     Gain on sale of discontinued operations                 0          524
     Income  from discontinued operations                    0          142
                                                           ----        -----
     Net loss                                             (416)%        (767)%
                                                          =====        =====

Changes in Results of Operations: Year ended July 31, 2005 compared to year
ended July 31, 2004.

     OptiChem revenues for the year ended July 31, 2005 were $336,610 as
compared to $118,614 for the year ended July 31, 2004, resulting in an increase
of $217,996, or 183.8%. The increase in OptiChem revenues is primarily the
result of increasing number of slides sold to SCHOTT, which included slides for
one of their customers.

     During the year ended July 31, 2005, sales to the Company's two largest
customers for OptiChem slides were $318,545 and $11,775, representing 63.4% and
2.4% of the Company's total revenues. During the year ended July 31, 2004, sales
to the Company's two largest customers were $65,116 and $35,200, or 55% and 30%
of the Company's revenues. The loss of a major customer could have a significant
impact on the Company's financial performance in any given year.

     Consulting fees of $90,000 during the year ended July 31, 2005 were the
result of a development contract with a single Company. License Fees and Option
Fees of $50,000 and $25,500, respectively, in the year ended July 31, 2005 were
from the License Agreement with SCHOTT. (See Note 7) There were no consulting
fees, license fees or option fees during the year ended July 31, 2004.

     Research and development expenses for the year ended July 31, 2005, were
$1,304,888 as compared to $554,416 during the year ended July 31, 2004, an
increase of $750,472 or 135.4%. The two major components of this increase were:
(i) salaries which increased by $186,054, as a result of hiring three additional
research scientists and normal increases in personnel salaries, and (ii) the
development of the BACcelr8r project which resulted in an increase of $513,991
in outside engineering fees related to that project.

                                       22

<PAGE>


          General and administrative expenses for the year ended July 31, 2005
was $933,183 as compared to $872,198 during the year ended July 31, 2004, an
increase of $60,985, or 7.0%. The following summarizes the major components of
the changes:
<TABLE>
<CAPTION>


                                                                                   Increase
                                               2005               2004           (Decrease)
                                               ----               ----           ----------
<S>                                         <C>                <C>               <C>
Audit and Accounting                        $46,470            $49,380           $ (2,910)
Consulting Fees                              99,320             65,348              33,972
Corporate and Shareholder                    74,159            145,184            (71,025)
Corporate Insurance                          54,744             73,745            (19,001)
Deferred Compensation                       101,332             91,906               9,426
Employee Benefits                           115,048             62,853              52,195
Payroll Taxes                                61,750             55,784               5,966
Salaries                                    286,452            242,073              44,379
Travel                                       13,006             12,075                 931
Legal                                        37,086             58,078            (20,992)
Miscellaneous Other Categories               43,816             15,772              28,044
                                           --------           --------             -------
                                           $933,183           $872,198             $60,985
                                           ========           ========             =======
</TABLE>

     The decrease in audit and accounting was due to a change in auditors. The
increase in consulting fees of $33,972 was due to the cost of a valuation of the
intellectual property and an individual who was an employee in 2004 moving to a
consulting position in 2005. Corporate and shareholder expenses decreased
because: (i) of the non-recurring payment of the original listing fee for the
American Stock Exchange in the amount of $55,000, which was paid during the
fiscal year ended July 31, 2004, and (ii) $18,245 due to a change in public
relations companies during the first quarter of fiscal 2005. Corporate insurance
decreased because the Company terminated the errors and emissions insurance
related to the software migration tools. Deferred compensation increased due to
the change in market value of the securities held in the deferred compensation
trust at July 31, 2005. Salaries and employee benefits increased due to a former
consultant becoming employed as President of the Company, and additions to the
scientific staff. The decrease in legal is due to litigation that was settled in
fiscal 2004. Miscellaneous other categories includes allocated facilities rent,
for non-research and development, computer and office supplies and other
miscellaneous items.

     The increase in amortization for the year ended July 31, 2005 was
negligible.

     Cost of sales for the year ended July 31, 2005 was $155,508 compared to
$65,630 during the year ended July 31, 2004, an increase of $89,878 or 136.9%.
This increase was primarily the result of the increase in sales. Cost of goods
sold as a percentage of OptiChem revenues was 42.4% for the year ended July31,
2005 as compared to 55.3% for the year ended July 31, 2004. This decrease is due
to efficiency in production and decreased cost of materials primarily chemicals
for the OptiChem formula.

     Marketing and sales expenses for the year ended July 31, 2005 were $61,795
as compared to $106,169 during the year ended July 31, 2004, a decrease of
$44,374 or 41.8%. The decreased was the result of a consultant whose fees were
charged to marketing, during the fiscal year ended July 31, 2004 and who is now
President of the Company and whose salary is classified under general and
administrative expenses. Additionally, the reduction in marketing and sales
expenses is the result of decreased expenses associated with attending industry
trade shows since the signing of the SCHOTT agreement in November 2004.

     Depreciation for the year ended July 31, 2005 was $70,075 as compared to
$48,298 during the year ended July 31, 2004, an increase of $21,777 or 45.1%.
The increased depreciation was primarily the result of additional laboratory
equipment being placed into service and depreciated.

                                       23

<PAGE>


     For the year ended July 31, 2005 there were no trademarks abandoned as
compared to $10,316 for trademarks abandoned during the year ended July 31,
2004.

     As a result of these factors, loss from operations for the year ended July
31, 2005 was $2,258,947 as compared to a loss of $1,772,908 during the year
ended July 31, 2004, an increased loss of $486,039 or 27.4%.

     Interest and dividend income for the year ended July 31, 2005 was $153,312
as compared to $64,259 during the year ended July 31, 2004, an increase of
$89,053 or 138.6%. Of this amount, $16,000 was from the note receivable (See
Note 11), and the balance was the result of an increase in interest earned on
our cash balance as a result of an increase in interest rates.

     Unrealized gain on marketable securities held in the deferred compensation
trust for the year ended July 31, 2005 was $13,064, compared to combined
realized and unrealized gain of $9,827 for the year ended July 31, 2004. The
unrealized gain was a result of market fluctuations. The total of the realized
gain and unrealized gain in marketable securities is reflected as deferred
compensation and included in general and administrative expenses.

     For the year ended July 31, 2004, gain on sale of discontinued operations
was $621,191. See Note 10 to the financial statements.

     For the year ended July 31, 2004 income from discontinued operations was
$168,210.

     As a result of these factors, net loss for the year ended July 31, 2005 was
$2,090,800 as compared to $909,421 during the year ended July 31, 2004, an
increased loss of $1,181,379 or 129.9%.

Impairment of Intangible Assets

     The Company routinely evaluates the recoverability of its long-lived assets
based upon estimated future cash flows from and estimated fair value of such
long-lived assets. If in management's judgment, the anticipated undiscounted
cash flows or estimated fair value are insufficient to recover the carrying
amount of the long-lived asset, the Company will determine the amount of the
impairment and the value of the asset will be written down. During the fiscal
year ended July 31, 2004, the Company recorded an impairment of $10,316 for
trademark abandonment.

Capital Resources and Liquidity

     As of July 31, 2005, the Company had $5,564,259 in cash and cash
equivalents, a decrease of $1,669,171 from $7,233,430 at July 31, 2004. The
primary reasons for change in cash and cash equivalents were cash used for
operating activities of $1,563,644 and investment in new scientific equipment,
patents, and trademarks of $127,935, and funding of the deferred compensation
plan of $75,000, offset by the receipt of a $133,333 payment on a promissory
note from the sale of the software migration tools.

     As compared to the fiscal year ended July 31, 2004, the Company's current
assets decreased $1,373,581 from $7,504,195 to $6,130,614 and the Company's
liquidity during the same period, as measured by cash and cash equivalents,
decreased by 23.1% from $7,233,430 to $5,564,259. The Company's working capital
decreased by 30.2% from $7,257,408 to $5,633,254 and shareholders' equity
decreased 22.4% from $11,736,640 to $9,668,340 as a result of an increased in
accumulated deficit of $2,090,800.

     For the year ended July 31, 2005, we spent $1,304,888 on research and
development expenses. As of the date of this annual report, we have only
realized nominal revenues from the sale of our products. Notwithstanding our
investments in research and development, there can be no assurance that the
BACcelr8r or any of our other products will be successful, or even if they are
successful, will provide sufficient revenues to continue our current operations.
If we are unable to realize any revenues from our products, we will require
additional funds from other sources to continue operations. Management believes
that current cash balances plus cash flow from operations will be sufficient to
fund our capital and liquidity needs for at least the next twenty-four months.

                                       24

<PAGE>


Capital Commitments

     As of July 31, 2005, the Company had one outstanding lease commitment in
the amount of $121,815 over the next three years and an employment agreement
with our Chairman and Chief Executive Officer which calls for the aggregate
payments of approximately $580,000 over the next 29 months. See Note 14 to
financial statements "Operating Leases" and "Employment Agreement."

Recent Accounting Pronouncements

     In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure--an amendment of FASB
Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures about the method
of accounting for stock-based employee compensation and the effect of the method
used on reported results in both annual and interim financial statements. The
Company will continue to account for its stock-based compensation plan under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations. See Note 6 for further
discussion.

     In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" (SFAS 123R), which replaces SFAS 123 and supercedes APB Opinion No. 25.
SFAS 123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on
their fair values. The proforma disclosures previously permitted under SFAS 123
no longer will be an alternative to financial statement recognition. For the
Company, SFAS 123R is effective for periods beginning after December 15, 2005.
Early application of SFAS 123R is encouraged, but not required. We plan to adopt
SFAS 123R on February 1, 2006 using the modified prospective application method
described in the statement. Under the modified prospective application method,
we will apply the standard to new awards, and to awards modified, repurchased,
or cancelled after the required effective date. Additionally , compensation cost
for the unvested portion of awards outstanding as of the required effected date
will be recognized as compensation expense as the requisite service is rendered
after the required effective date.

     In August 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." SFAS 154 changes the requirements for the accounting for and
reporting of a change in accounting principle, requiring, in general,
retrospective application to prior periods' financial statements of changes in
accounting principle. The Company has adopted the provisions of SFAS No. 154
which are effective for accounting changes and corrections of errors beginning
after December 15, 2005. The adoption did not have a material effect on the
results of operations of the Company.

Application of Critical Accounting Policies

Use of Estimates

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

                                       25

<PAGE>


Revenue Recognition

     We generate revenue as follows:

     o    Consulting revenue is recognized as services are performed.

     o    OptiChem revenue is recognized upon shipping of the product to the
          customer.

     o    Deferred revenue represents amounts billed but not yet earned under
          consulting agreements.

Deferred Taxes

     We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based on historical taxable income, projected
future taxable income, and the expected timing of the reversals of existing
temporary differences. As of July 31, 2005 and July 31, 2004, we have
established a valuation allowance equal to our net deferred tax asset, as we
have not been able to determine that we will generate sufficient future taxable
income to allow us to realize the deferred tax asset.

Intangible Assets

     We amortize our intangible assets over the period the asset is expected to
contribute directly or indirectly to our future cash flows. We evaluate the
remaining useful life of each intangible asset that is being amortized each
reporting period to determine whether events and circumstances warrant a
revision to the remaining period of amortization.

     We review our intangible assets for impairment each reporting period as
discussed below under "Impairment of long-lived and intangible assets." An
impairment loss will be recognized if the carrying amount of an intangible asset
is not recoverable and its carrying amount exceeds its fair value.

Impairment of Long-Lived and Intangible Assets

     We assess the impairment of identifiable intangibles and long-lived assets
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important which could trigger an
impairment review include the following:

     o    significant underperformance relative to expected historical or
          projected future operating results;

     o    significant changes in the manner of our use of the acquired assets or
          the strategy for our overall business;

     o    significant negative industry or economic trends;

     o    significant decline in our stock price for a sustained period; and

     o    our market capitalization relative to net book value.

     When we determine that the carrying value of intangibles and long-lived
assets may not be recoverable based upon the existence of one or more of the
above indicators of impairment, we measure any impairment based on a projected
discounted cash flow method using a discount rate determined by our management
to be commensurate with the risk inherent in our current business model. Our
judgments regarding the existence of impairment indicators are also based on

                                       26

<PAGE>


legal factors, market conditions and expected future operational performance of
related product lines of the identifiable intangible. Future events could cause
us to conclude that impairment indicators exist and that our identifiable assets
are impaired. Management believes that the amounts carried on our balance sheet
are recoverable, and that our intangible assets are not impaired at this time.
Management's belief is based upon an independent valuation of our intangibles
that was obtained from a third party valuation firm and management's assessment
of the fair value of our intangibles. Our intangibles constitute a significant
portion of our assets, and as a result, any resulting impairment loss could have
a material adverse impact on our financial condition and results of operations
in the future. We also evaluate the remaining estimated useful lives of each
asset each reporting period and determine whether events or circumstances
require revised useful lives.

Research and Development

     Research and development expenses are expensed as incurred. Research and
development expenses include salaries and related expenses associated with the
development of our technology and include compensation paid to engineering
personnel and fees to consultants.

Contractual Obligations

     The following table sets forth information with respect to our contractual
obligations and commercial commitments as of July 31, 2005.

                                          Contractual Obligations(3)
<TABLE>
<CAPTION>

Payments Due By Period
                                                                                        More than
                                  Total          1 to 3 years       4 to 5 years         5 years
                                  -----          ------------       ------------         -------


<S>                             <C>               <C>                       <C>               <C>
Office and Laboratory           $121,815          $121,815                 -0-               -0-
Lease Payments(1)

Thomas V. Geimer
Employment Contract (2)         $580,000          $580,000                 -0-               -0-
</TABLE>

(1)  Includes monthly deposits for taxes and assessments, landlords liability
     insurance and common facilities charges. We have a three-year lease
     agreement that began on October 1, 2004 for our office and laboratory
     located at 7000 North Broadway, Building 3-307, Denver, Colorado 80221.
(2)  Calculated as of July 31, 2005. Mr. Geimer's employment agreement expires
     on December 31, 2007. See "Item 10-Executive Compensation."
(3)  Excludes accounts payable and accrued liabilities.

Item 7.  Financial Statements

     The response to this item is submitted as a separate section of this report
beginning on page F-1.

Item 8. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure

     Not Applicable.

Item 8A.  Controls and Procedures

     An evaluation was conducted under the supervision and with the
participation of the Company's management, including Thomas V. Geimer, the
Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"),
of the effectiveness of the design and operation of the Company's disclosure

                                       27

<PAGE>


controls and procedures as of July 31, 2005. Based on that evaluation, Mr.
Geimer concluded that the Company's disclosure controls and procedures were
effective as of such date to ensure that information required to be disclosed in
the reports that it files or submits under the Exchange Act, is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms. Such officers also confirm that there was no change in the
Company's internal control over financial reporting during the year ended July
31, 2005.

Item 8B.  Other Information.

     Not Applicable.

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act

     Set forth below is certain information concerning the directors, executive
officers and key employees and consultants of the Company as of the date hereof.


      Directors, Executive Officers, and Key Employees and Key Consultants

    Thomas V. Geimer                 58    Secretary, Chief Executive Officer,
                                           Chief Financial Officer, Chairman of
                                           the Board
    David C. Howson                  62    President
    Charles E. Gerretson (1)         59    Director
    A. Alexander Arnold III (1)      64    Director
    Michael J. Lochhead, Ph.D.       40    Senior Scientist
    Charles Greef, Ph.D.             47    Senior Scientist
    Steven W. Metzger                31    Senior Scientist
    David W. Grainger, Ph.D.         44    Chairman, Scientific Advisory Board,
                                           Consultant
    David Goldberg, Ph.D.            50    Consultant
    Marin Kollef, MD                 47    Consultant

-----------------
(1)  Members of the Audit and Compensation Committees

     Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified. All of
our officers devote their full-time to our business and affairs. There are no
family relationships between any directors, executive officers or key employees
or consultants.

     Thomas V. Geimer has been the Chairman of the Board of Directors and a
director of Accelr8 since 1987. He currently serves as the Chief Executive
Officer, Chief Financial Officer and Secretary of the Company. Mr. Geimer is
responsible for development of our business strategy, day-to-day operations,
accounting and finance functions. Before assuming full-time responsibilities at
the Company, Mr. Geimer founded and operated an investment banking firm.

     David Howson became the President of the Company in April 2004. Previously
Mr. Howson was a consultant to the Company and had acted as the Director for
Business Development since January 2001. Mr. Howson is responsible for
coordinating business plan development and execution. Before assuming
responsibilities at the Company, Mr. Howson founded and operated the Altro
Group, LLC, a medical technology consulting firm. His clients at Altro included

                                       28

<PAGE>


medical industry leaders such as Pfizer, Boston Scientific, and Becton
Dickinson. Mr. Howson had previously founded and managed three companies for
advanced medical devices. From 1966 through 1970, Mr. Howson was enrolled in the
Neurobiology Doctoral Program at Cornell University and received a Bachelor of
Science degree from Hobart College in 1966.

     A. Alexander Arnold III has served as a director of the Company since
September 1992. For the past 25 years Mr. Arnold has served as a Managing
Director of Trainer, Wortham & Co., Inc., a New York City-based investment
counseling firm. Mr. Arnold received a Bachelor of Arts degree from Rollins
College in 1964 and a Masters of Business Administration from Boston University
in 1966.

     Charles E. Gerretson was appointed a director of the Company on July 19,
2003. For the past 28 years, Mr. Gerretson has served as the President of
Gerretson Realty, Inc., a Denver Colorado based real estate firm, which Mr.
Gerretson founded. Mr. Gerretson received a Bachelor of Science degree in
Business Administration from the University of Minnesota in 1968. Mr. Gerretson
was formerly a CPA with Arthur Andersen and Company and currently heads the
Company's Audit Committee.

Employees and Consultants

     Michael J. Lochhead, Ph.D. has been a Senior Scientist with Accelr8 since
April 2001. Dr. Lochhead is responsible for product design and development. From
1998 through 2001, Dr. Lochhead was an Assistant Professor of Chemical
Engineering at the University of New Hampshire. Dr. Lochhead received a Bachelor
of Arts and Science degree from the University of Notre Dame and a Ph.D. in
Chemical Engineering from the University of Wisconsin in 1995. He is a surface
chemist responsible for coating formulations and scalable manufacturing
processes.

     Steven W. Metzger has been a research scientist with the Company since
April 2001, and is now a Senior Scientist. From 2000 through 2001, Mr. Metzger
was responsible for the implementation of merging core technologies at Heska
Corporation. He was previously employed by Geo-Centers, Inc. under contract at
the Naval Research Laboratory in Washington, D.C. where he focused on
bio-warfare pathogen detection. Mr. Metzger received a Bachelor of Arts degree
in Chemistry from Colorado College in 1996.

     Charles Greef, Ph.D. has been a Senior Scientist with the Company since May
2003. Dr. Greef received his Doctorate in Chemistry from the University of
Colorado at Boulder under the direction of Professor Marvin Caruthers, studying
synthesis and biochemical properties of oligonucleotide analogs. He has held the
position of Research Scientist at Nanogen, Genicon Sciences Corporation, and
SomaLogic, all emphasizing research and product development of microarray
related technologies. He is a specialist in proteins and microarraying.

     David W. Grainger, Ph.D. has been a consultant to the Company since January
2001. Since 1994, Dr. Grainger has taught as a Professor and Assistant Professor
of Chemistry at Colorado State University. From 1998 through 1999, Dr. Grainger
was the President and Chief Scientific Officer for Gamma-A Technologies, Inc.
Dr. Grainger received a Bachelor of Arts degree in Engineering from Dartmouth
College in 1983 and a Ph.D. in Pharmaceutical Chemistry from the University of
Utah in 1987. Dr. Grainger chaired the prestigious Gordon Conference on Tissue
Engineering and Biomaterials in 2001. He has been a consultant to companies such
as Novartis, Johnson & Johnson, 3M, Ciba-Geigy, and others.

     David Goldberg, Ph.D. has been a consultant to the Company since October
2002. Dr. Goldberg received his Doctorate in Biology from the California
Institute of Technology. He did postdoctoral studies at Harvard and at the
Molecular Biology Laboratory of the MRC, Cambridge. Dr. Goldberg has
wide-ranging expertise in analytical systems and engineering as well as
molecular biology. He is the inventor of the Company's proprietary molecular


                                       29

<PAGE>


capture methodology and has been an officer/founder of various startup
technology companies that have focused on areas that apply to our business, i.e.
vapor deposition sputtering and tunable thin film filter technologies.

     Marin Kollef, M.D., FACP, FCCP has been a consultant to the Company since
October of 2004. For the past five years Dr. Kollef has been self employed as a
consultant to Barnes-Jewish Hospital. Dr. Kollef is a Professor of Medicine at
the Washington University School of Medicine in St. Louis, Director of the
Medical Intensive Care Unit, and Director of Respiratory Care Services at
Barnes-Jewish Hospital. Dr. Kollef is a graduate of the United States Military
Academy at West Point (1979) and received his degree as Doctor of Medicine at
the University of Rochester School of Medicine and Dentistry (1983). Dr. Kollef
has advised the Company on clinical applications and the major issues involved
in managing infectious diseases in critically ill patients.

Scientific Advisory Board

     The Company established a Scientific Advisory Board in 2003. Dr. David
Grainger is Chairman and Dr. David Goldberg is a member.

Involvement in Certain Legal Proceedings

     On July 12, 2001, without admitting or denying any liability, Thomas V.
Geimer consented to the entry of a final judgment in the United States District
Court for the District of Colorado, Civil Action No. 99-D-2203. The final
judgment enjoined Mr. Geimer from future violations of Section 13 of the
Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 promulgated thereunder. In
connection with the settlement, Mr. Geimer paid a civil penalty of $65,000. The
costs of Mr. Geimer's defense plus the civil penalties were borne by the
Company. There was no restatement of financial statements required for this
settlement.

Board Committees

     The Board of Directors maintains a Compensation Committee and an Audit
Committee. The members of the Compensation Committee and the Audit Committee are
Mr. Arnold and Mr. Gerretson, the Company's independent directors. The
Compensation Committee did not meet during the last fiscal year. The Audit
Committee held five meetings during the last fiscal year. The Audit Committee's
financial expert is Charles E. Gerretson.

Audit Committee Report

     The Audit Committee has reviewed and discussed with management the
Company's audited financial statements for the year ended July 31, 2005.

     The Audit Committee has also discussed with Comiskey & Company, P.C. the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.

     The Audit Committee has received and reviewed the written disclosures and
the letter from Comiskey & Company, P.C. required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees, as
amended, and has discussed with Comiskey & Company, P.C. their independence.

     Based on the reviews and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited financial statements
referred to above be included in the Company's Annual Report on Form 10-KSB for
the year ended July 31, 2005 filed with the Securities and Exchange Commission.

                                       30

<PAGE>


Audit Committee of The Board of Directors

     A. Alexander Arnold III
     Charles E. Gerretson

Compliance With Section 16(a) of The Exchange Act

     Section 16(a) of the Exchange Act, generally requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities ("10% owners") to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Directors and executive
officers and 10% owners are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on review of copies of such
reports furnished to us and verbal representations that no other reports were
required to be filed during the fiscal year ended July 31, 2005, all Section
16(a) filing requirements applicable to its directors, executive officers and
10% owners were met, except that (i) David Howson, President of the Company
failed to timely file a Form 4 in March 2005 disclosing four transactions, which
was filed on March 31, 2005, (ii) Charles E. Gerretson failed to timely file a
Form 4 in February 2005 disclosing one transaction that was filed in October
2005, and (iii) DDx, Inc. failed to timely file a Form 4 in February 2005
disclosing one transaction, which was filed on February 22, 2005.

Code of Ethics

     The Company has adopted a code of ethics for its principal executive
officer and senior financial officers and a code of ethics and standards of
conduct, that is applicable to all directors, officers and employees.
Stockholders may request a free copy of these documents from:

         Accelr8 Technology Corporation
         7000 North Broadway, Building 3-307
         Denver, Colorado 80221

Item 10. Executive Compensation

     Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company in the
three fiscal years ended July 31, 2005, 2004 and 2003, of Thomas V. Geimer and
David C. Howson, the Company's most highly compensated executive officers.

                                       31

<PAGE>
<TABLE>
<CAPTION>


--------------------------- ----------------------------------------- ------------------------------------
                   Annual Compensation Long Term Compensation
--------------------------- ----------------------------------------- ------------------------------------

Name and                    Fiscal        Salary          Other       Other Annual         Securities
Principal Position            Year                                    Compensation         Underlying
                                                                                             Options
--------------------------- ---------- -------------- --------------- ----------------- ------------------

<S>                         <C>        <C>            <C>             <C>
Thomas V. Geimer            2005       $165,000       $75,000(1)      $      --                --
  Chief Executive           2004       $165,000       $75,000(1)      $      --                --
  Officer and Chief         2003       $142,500       $75,000(1)      $      --                --
  Financial Officer
--------------------------- ---------- -------------- --------------- ----------------- ------------------

David C. Howson             2005       $120,000            --         $      --             300,000 (4)
  President                 2004       $102,039(2)          --        $      --                --
                            2003       $ 95,500(3)         --         $      --                --

--------------------------- ---------- -------------- --------------- ----------------- ------------------

-------------------
(1)  Represents deferred compensation for Mr. Geimer pursuant to the Company's
     deferred compensation plan, $75,000 of which vested during each of the
     fiscal years ended July 31, 2005, 2004 and 2003.

(2)  Includes $66,500 paid to Mr. Howson as a consultant from August 1, 2003 to
     March, 2004.

(3)  For services performed as a consultant to the Company.

(4)  Options at $2.57, of which 225,00 are vested and are 75,000 unvested.


Option/SAR Grants in Last Fiscal Year

         The following table sets forth information concerning options granted
during the fiscal year ended July 31, 2005 to either Thomas V. Geimer or David
C. Howson.

----------------------- --------------------- --------------------- --------------------- ---------------------
                        Number of             % of Total Options
                        Securities            Granted to                  Exercise             Expiration
      Name              Underlying Options    Employees in Fiscal           Price                 Date
                        Granted               Year
----------------------- --------------------- --------------------- --------------------- ---------------------

David C. Howson               225,000                69.8%                 $ 2.57            March 15, 2015

                             75,000 (1)              23.3%                 $ 2.57            March 15, 2015
----------------------- --------------------- --------------------- --------------------- ---------------------

                                       32

<PAGE>


(1)  The 75,000 stock options shall vest if and only if prior to the expiration
     date of the Options, the Company closes on a transfer for the sale of the
     Company assets or the acquisition of the Company in which the Company's
     shareholders receive aggregate consideration at closing equal to or greater
     than $250,000,000.

Option Values

The following table provides certain information concerning the fiscal year end
value of unexercised options held by Mr. Geimer and Mr. Howson.

                                   Aggregated Option Exercises in 2005 Fiscal Year
                                          and Fiscal Year End Option Values

                     Shares                         Number of Unexercised         Value of Unexercised
                     Acquired on      Value         Options at Fiscal Year        In-the-Money Options
Name                 Exercise         Realized      End                           Fiscal Year End(1)
------------------------------------------------------------------------------------------------------------
                                                    Exer-            Unexer-      Exer-        Unexer-
                                                    cisable          cisable      cisable      cisable
                                                    -------          -------      -------      -------

Thomas V. Geimer          0              0           300,000              0       $487,000      $     0

David Howson              0              0           225,000         75,000       $189,000      $39,000

-----------
</TABLE>

(1)  Value calculated by determining the difference between the closing sales
     price on July 29, 2005, of $3.09 per share and the exercise price of the
     options. Fair market value was not discounted for restricted nature of any
     stock purchased on exercise of these options.

Employment Agreement

     Effective December 1, 2002, we entered into an employment agreement with
our Chairman, Chief Executive Officer and Chief Financial Officer and Secretary,
Mr. Thomas V. Geimer. The agreement was negotiated and approved by the
Compensation Committee. The agreement provides for an annual base salary of
$165,000 with annual deferred compensation of $75,000. The agreement expires on
December 31, 2007. In the event of termination by mutual agreement, termination
"with cause," as defined in the agreement, death or permanent incapacity or
voluntary termination, Mr. Geimer or his estate would be entitled to the sum of
the base salary and unreimbursed expenses accrued to the date of termination and
any other amounts due under the agreement. In the event of termination "without
cause," as defined in the agreement, Mr. Geimer would be entitled to the sum of
the base salary and unreimbursed expenses accrued to the date of termination and
any other amounts due under the agreement and an amount equal to the greater of
Mr. Geimer's annual base salary (12 months of salary) or any other amounts
remaining due to Mr. Geimer under the agreement, which as of July 31, 2005 would
be $580,000. Additionally, in the event of a change in control, any unpaid
amounts due under the initial term of the agreement for both base salary and
deferred compensation would be payable plus five times the sum of the base
salary and deferred compensation.

Compensation Pursuant to Plans

     Deferred Compensation Plan. In January 1996, we established a deferred
compensation plan for our employees. Contributions to the plan are provided for
under the employment agreement detailed above. For each of the fiscal years
ended July 31, 2005 and 2004, we contributed $75,000 to the plan. The $75,000
contribution for the fiscal year ended July 31, 2005 was made on September 1,
2005.
                                       33
<PAGE>


     On October 14, 1997, Thomas V. Geimer exercised an aggregate of 1,140,000
warrants and options to acquire 1,140,000 shares of the Company's Common Stock
at an exercise price of $0.24 per share. Under the terms of the Rabbi Trust, we
will hold the shares in trust and carry the shares as held for employee benefit
by the Company. The Rabbi Trust provides that upon Mr. Geimer's death,
disability, or termination of his employment the shares will be released ratably
over the subsequent ten (10) years, unless the Board of Directors determines
otherwise. See Note 14 to the Financial Statement for further information.

Securities Authorized For Issuance Under Compensation Plans

     The table set forth below presents the securities authorized for issuance
with respect to compensation plans under which equity securities are authorized
for issuance as of July 31, 2005:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
                                  Equity Compensation Plan Information
---------------------------------------------------------------------------------------------------------

      Plan Category         Number of securities    Weighted-average     Number of securities remaining
                                     to
                               be issued upon
                                  exercise          exercise price of    available for future issuance
                               of outstanding          outstanding      under equity compensation plans
                                  options,          options, warrants   (excluding securities reflected
                            warrants and rights        and rights              in the 1st column)
-------------------------- ----------------------- -------------------- ---------------------------------

<S>                               <C>                     <C>                        <C>
Equity Compensation               970,000                 $2.06                      452,500
Plans approved by
security holders
-------------------------- ----------------------- -------------------- ---------------------------------
Equity Compensation              200,000 (1)              $2.25                        N/A
Plans not approved by
security holders
-------------------------- ----------------------- -------------------- ---------------------------------
Total                             1,170,000                                          452,500
-------------------------- ----------------------- -------------------- ---------------------------------
</TABLE>

(1)  In connection with the purchase of the YoDx technology, the Company agreed
     to issue an additional 200,000 stock options with the same terms as the
     Company's Non-Qualified Stock Option Plan upon the earlier of (a) the
     Company achieving certain accumulated revenue levels associated with the
     YoDx(TM) technology or (b) a change in control of the Company prior to the
     expiration date of the options. As of October 12, 2005, the contingent
     provisions have not been met and the options have not been granted. The
     Company has reserved a sufficient number of shares for such options.

The 1996 Stock Option Plans

     The Board of Directors of the Company has adopted an incentive stock option
plan (the "Qualified Plan") which provides for the grant of options to purchase
an aggregate of not more than 700,000 shares of the Company's Common Stock. The
purpose of the Qualified Plan is to make options available to management and
employees of the Company in order to provide them with a more direct stake in
the future of the Company and to encourage them to remain with the Company. The
Qualified Plan provides for the granting to management and employees of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code").

     The Board of Directors of the Company has adopted a non-qualified stock
option plan (the "Non-Qualified Plan") which provides for the grant of options
to purchase an aggregate of not more than 300,000 shares of the Company's Common
Stock. The purpose of the Non-Qualified Plan is to provide certain key
consultants, independent contractors, technical advisors and directors of the

                                       34

<PAGE>


Company with options in order to provide additional rewards and incentives for
contributing to the success of the Company. These options are not incentive
stock options within the meaning of Section 422 of the Code.

     The Qualified Plan and the Non-Qualified Plan (the "Stock Option Plans")
are administered by a committee (the "Committee") appointed by the Board of
Directors which determines the persons to be granted options under the Stock
Option Plans and the number of shares subject to each option. No options granted
under the Stock Option Plans are transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by such optionee. Any options granted to an
employee terminate 90 days after his ceasing to be an employee, except in
limited circumstances, including death of the employee, and where the Committee
deems it to be in the Company's best interests not to terminate the options.

     The exercise price of all incentive stock options granted under the
Qualified Plan must be equal to the fair market value of such shares on the date
of grant as determined by the Committee, based on guidelines set forth in the
Qualified Plan. The exercise price may be paid in cash or (if the Qualified Plan
shall meet the requirements of rules adopted under the Exchange Act) in Common
Stock or a combination of cash and Common Stock. The term of each option and the
manner in which it may be exercised will be determined by the Committee, subject
to the requirement that no option may be exercisable more than 10 years after
the date of grant. With respect to an incentive stock option granted to a
participant who owns more than 10% of the voting rights of the Company's
outstanding capital stock on the date of grant, the exercise price of the option
must be at least equal to 110% of the fair market value on the date of grant and
the option may not be exercisable more than five years after the date of grant.

     The Stock Option Plans were approved by our shareholders at a special
shareholders meeting held on November 8, 1996. At the annual meeting of
shareholders held on December 12, 2002, shareholders approved the following
amendments to the Qualified Plan and the Non-Qualified Plan: (i) the Committee
was given the power to amend and alter the Qualified Plan and the Non-Qualified
Plan so long as the amendments do not affect any outstanding options; (ii)
provide that any shares cancelled, terminated, or expired pursuant to the
Qualified Plan and the Non-Qualified Plan be made available for purposes of the
Qualified Plan and the Non-Qualified Plan; (iii) provide that the cashless
exercise provision of the Qualified Plan and the Non-Qualified Plan be in the
sole discretion of the Committee; and (iv) extended the expiration date of the
Qualified Plan and the Non-Qualified Plan until December 12, 2012.

     As of July 31, 2005, 477,500 options had been granted pursuant to the
Qualified Plan with 2,500 of these options exercised and 222,500 available for
grant and 250,000 options had been granted pursuant to the Non-Qualified Plan
with 75,000 of these options exercised and 50,000 available for grant.

2004 Omnibus Stock Option Plan

     On December 14, 2004, the shareholders approved the Company's 2004 Omnibus
Stock Option Plan (the "Omnibus Plan"). The Omnibus Plan authorizes the issuance
of up to five hundred thousand (500,000) shares of the Company's Common Stock.
The purpose of the Omnibus Plan is to promote the growth of the Company by
permitting the Company to grant options ("Options") to purchase shares of its
Common Stock, to attract and retain the best available personnel for positions
of substantial responsibility and to provide certain key employees, independent
contractors, consultants, technical advisors and directors of the Company with a
more direct stake in the future of the Company and provide an additional
incentive to contribute to the success of the Company.

     The Omnibus Plan is administered by the Compensation Committee of the Board
or any committee of the Board performing similar functions, as appointed from
time to time by the Board (the "Omnibus Committee"). Pursuant to the terms of
the Omnibus Plan, the Omnibus Committee may grant either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986

                                       35

<PAGE>


(the "Code") or nonqualified stock options, provided that incentive stock
options may not be granted to independent contractors and consultants. The
exercise price of all incentive stock options granted under the Omnibus Plan
must be equal to the fair market value of such shares on the date of grant as
determined by the Omnibus Committee, based on guidelines set forth in the
Omnibus Plan. The exercise price of nonqualified stock options granted under the
Omnibus Plan shall be not less than 50% of the fair market value of a share on
the date of grant of such Option. The Omnibus Committee may grant on behalf of
the Company, Options to purchase shares of the Company's Common Stock to any key
employee, independent contractor, consultant, technical advisor or director.

     As of July 31, 2005, 320,000 options had been granted pursuant to the
Omnibus Plan with none of these options exercised and 180,000 were available for
grant.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of October 12, 2005 by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock; (ii) each of the Company's executive officers and
directors; and (iii) all executive officers and directors as a group. The
calculation excludes 1,129,110 shares which are held by the Rabbi Trust for the
benefit of Thomas V. Geimer. Further, Mr. Geimer does not have voting power over
the shares that are held by the Rabbi Trust. Common Stock not outstanding but
deemed beneficially owned by virtue of the right of an individual to acquire
shares is treated as outstanding only when determining the amount and percentage
of Common Stock owned by such individual. Except as noted, each person or entity
has sole voting and sole dispositive power with respect to the shares shown.

                                       36

<PAGE>


   Name and Address of Beneficial Owner         Shares Beneficially Owned
   ------------------------------------         -------------------------
                                                Number            Percent
                                                ------            -------

   Thomas V. Geimer (1)                         348,700            3.40%
   7000 North Broadway, Building 3-307
   Denver, Colorado 80221

   A. Alexander Arnold III(2)                   868,000            8.64%
   845 Third Ave., 6th Floor
   New York, NY 10021

   Charles E. Gerretson(3)                      128,150            1.28%
   7000 North Broadway, Building 3-307
   Denver, Colorado 80221

   David Howson(4)                               300,000            2.92%
   7000 North Broadway, Building 3-307
   Denver, Colorado 80221

   Executive Officers and Directors            1,644,850           15.44%
   as a Group (4 persons)

---------------
(1)  Does not include 1,129,110 shares, which were purchased by Mr. Geimer upon
     exercise of warrants and options. Mr. Geimer exercised these options and
     warrants on October 14, 1997, and simultaneously contributed the shares
     acquired to a Rabbi Trust. See Note 9 to Financial Statements for further
     information. Includes 300,000 shares, which may be purchased by Mr. Geimer
     upon exercise of options. Includes 400 shares held in brokerage accounts
     for Mr. Geimer's children, in which Mr. Geimer has the power and authority
     to dispose of the shares held by these accounts.
 2)  Includes 730,000 shares held by four trusts. Mr. Arnold merely serves as
     trustee for each of those trusts, but is not a beneficiary of and has no
     pecuniary interest in any of those trusts. Also includes 63,000 shares held
     in investment advisory accounts for which Mr. Arnold serves as the
     investment advisor. Also includes 75,000 shares, which may be purchased by
     Mr. Arnold upon exercise of options.
(3)  Includes: (i) 103,250 shares owned directly by Mr. Gerretson and (ii)
     10,000 shares, which may be purchased by Mr. Gerretson upon exercise of
     options which options expire on March 15, 2015. Also includes 14,900 shares
     held in brokerage and retirement accounts of individuals in which Mr.
     Gerretson has the power and authority to dispose of the shares held by
     these accounts. Mr. Gerretson disclaims any beneficial ownership with
     respect to such shares.
(4)  Includes 300,000 shares, which may be purchased by Mr. Howson upon exercise
     of options which options expire on March 15, 2015, of which 75,000 stock
     options shall vest if and only if prior to the expiration date of the
     Options, the Company closes on a transfer for the sale of the Company
     assets or the acquisition of the Company in which the Company's
     shareholders receive aggregate consideration at closing equal to or greater
     than $250,000,000.

Item 12. Certain Relationships and Related Transactions

     During fiscal year 1996, we established a deferred compensation plan for
our employees. We may make discretionary contributions to the plan based on
recommendations from the Board of Directors. As of July 31, 2005, the Board of
Directors had authorized deferred compensation totaling $750,000 since fiscal
year 1996 to Mr. Geimer of which $675,000 had been funded. The $75,000
representing the difference between the authorized deferred compensation and the
funded deferred compensation was funded on September 1, 2005.

                                       37

<PAGE>


     There were no other transactions or series of transactions for the fiscal
year ended July 31, 2005, nor are there any currently proposed transactions, or
series of the same to which we are a party, in which the amount involved exceeds
$60,000 and in which, to the knowledge of the Company, any director, executive
officer, nominee, 5% shareholder or any member of the immediate family of the
foregoing persons, have or will have a direct or indirect material interest.

Item 13. Exhibits and Reports on Form 8-K

(a)      Exhibits

10.1     Feasibility Testing Agreement with Promega dated October 5,  2005 (a
         confidential treatment request has been filed for this exhibit and
         confidential portions have been filed with the Securities and Exchange
         Commission)

14.1     Code of Ethics for Accelr8's principal executive officer and senior
         financial officers

14.2     Code of Ethics and Standards of Conduct

31.1     Certification of Principal Executive Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

31.2     Certification of Principal Financial Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

32.1     Certification of Principal Executive Officer and Chief Financial
         Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)      Financial Statements

     The following financial statements of the Company are included in Item 7:

      Report of Independent Registered Public Accounting Firm- Comiskey &
      Company, P.C.
      Balance Sheets as of July 31, 2005 and 2004
      Statements of Operations for the years ended July 31, 2005 and 2004
      Statements of Stockholders' Equity for the years ended July 31, 2005 and
        2004
      Statements of Cash Flows for the years ended July 31, 2005 and 2004
      Notes to Financial Statements

Item 14.  Principal Accountant Fees and Services

     The aggregate fees billed by Comiskey & Company, P.C. for professional
services rendered for the audit of the Company's annual consolidated financial
statements for the year ended July 31, 2005 including the reviews of the
unaudited interim financial statements of the Company's Form 10-QSBs was
approximately $5,677. The aggregate fees billed by Anton Collins Mitchell LLP
for professional services rendered for the audit of the Company's annual
consolidated financial statements for the fiscal years ended July 31, 2005 and
July 31, 2004, including the reviews of the unaudited interim financial
statements of the Company's Form 10-QSBs was approximately $39,514 and $45,500,
respectively.

Tax Fees

     The aggregate fees billed by Comiskey & Company, P.C. for professional
services rendered for the tax compliance, tax advice and tax planning for the

                                       38

<PAGE>


fiscal year ended July 31, 2005 ("Tax Fees") was $0. The aggregate fees billed
by Anton Collins Mitchell LLP for professional services rendered for the tax
compliance, tax advice and tax planning for the fiscal years ended July 31, 2005
and 2004 ("Tax Fees") were $0 and $0, respectively.

All other Fees

     Comiskey & Company, P.C. did not perform any professional services other
than those set forth above for the fiscal years ended July 31, 2005 and 2004.
Anton Collins Mitchell LLP did not perform any professional services other than
those set forth above for the fiscal years ended July 31, 2005 and 2004.

Audit Committee Pre-Approval Policies

     The Audit Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to any de minimus exceptions
that may be set for non-audit services described in Section 10A(i)(l)(B) of the
Exchange Act which are approved by the Committee prior to the completion of the
audit.

     None of the hours expended on the principal accountant's engagement to
audit the Company's financial statements for the most recent fiscal year were
attributed to work performed by persons other than the principal accountant's
full-time permanent employees.

                                       39

<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       ACCELR8 TECHNOLOGY CORPORATION

Date: October 31, 2005                 By:  /s/  David C. Howson
                                         ---------------------------------------
                                         David C. Howson, President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: October 31, 2005                 By:  /s/  Thomas V. Geimer
                                         ---------------------------------------
                                         Thomas V. Geimer, Chairman, Secretary,
                                         Chief Executive Officer and
                                         Chief Financial Officer

Date: October 31, 2005                 By:  /s/  Joan Montgomery
                                         ---------------------------------------
                                         Joan Montgomery, Principal Accounting
                                          Officer

Date: October 31, 2005                 By:  /s/  A. Alexander Arnold III
                                         ---------------------------------------
                                         A. Alexander Arnold III, Director

Date: October 31, 2005                 By:  /s/  Charles E. Gerretson
                                         ---------------------------------------
                                         Charles E. Gerretson, Director

                                       40


<PAGE>





                         ACCELR8 TECHNOLOGY CORPORATION

                              FINANCIAL STATEMENTS

                             JULY 31, 2005 and 2004








<PAGE>



                         ACCELR8 TECHNOLOGY CORPORATION

                               TABLE OF CONTENTS

                                                                        PAGE


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  F-2


BALANCE SHEETS                                                           F-3


STATEMENTS OF OPERATIONS                                                 F-4


STATEMENTS OF SHAREHOLDERS' EQUITY                                       F-5


STATEMENTS OF CASH FLOWS                                                 F-6


NOTES TO FINANCIAL STATEMENTS                                            F-7




<PAGE>






             Report of Independent Registered Public Accounting Firm




Board of Directors
Accelr8 Technology Corporation
Denver, Colorado


We have audited the accompanying balance sheet of Accelr8 Technology Corporation
(a Colorado corporation) as of July 31, 2005, and the related statements of
operations, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Accelr8 Technology Corporation
as of July 31, 2005, and the results of its operations and changes in its cash
flows for the year then ended in conformity with U.S. generally accepted
accounting principles.


Denver, Colorado
September 22, 2005

                                                        /s/ COMISKEY & COMPANY
                                                        PROFESSIONAL CORPORATION


                                      F-1

<PAGE>


             Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders
Accelr8 Technology Corporation
Denver, Colorado

We have audited the accompanying balance sheet of Accelr8 Technology Corporation
as of July 31, 2004 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Accelr8 Technology Corporation
at July 31, 2004 and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.



/s/ Anton Collins Mitchell LLP
Denver, Colorado
September 24, 2004

                                      F-2



<PAGE>

<TABLE>
<CAPTION>

                                              ACCELR8 TECHNOLOGY CORPORATION
                                                      BALANCE SHEETS
                                                 JULY 31, 2005 and 2004


                                                         ASSETS

                                                                             2005                   2004
                                                                             ----                   ----
<S>                                                                       <C>                    <C>
Current assets:
   Cash and cash equivalents                                            $  5,564,259           $  7,233,430
   Trade accounts receivable                                                  44,347                 15,948
   Other accounts receivable                                                     -0-                 50,000
   Inventory (Note 3)                                                         27,244                 30,287
   Prepaid expenses and other current assets (Note 4)                        228,097                 33,972
   Note receivable (Notes 11 and 15)                                         266,667                133,333
   Current assets of discontinued operations (Notes 11 and 15)                   -0-                  7,225
                                                                        ------------           ------------

         Total current assets                                              6,130,614              7,504,195

Property and equipment, net (Note 5)                                         230,847                216,733

Note Receivable (Notes 11 and 15)                                                -0-                266,667

Investments, net (Note 14)                                                   767,637                666,305

Intellectual property, net (Note 6)                                        3,878,969              4,070,832
                                                                        ------------           ------------

Total assets                                                            $ 11,008,067           $ 12,724,732
                                                                        ============           ============

                                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                   $    153,408           $     96,844
     Accrued compensation and other liabilities                              278,682                 46,793
     Liabilities for discontinued operations (Note 11)                           -0-                 43,150
     Deferred revenue (Note 12)                                               65,000                 60,000
                                                                        ------------           ------------
         Total current liabilities                                           497,090                246,787

Long-term liabilities:
     Deferred compensation (Note 14)                                         842,637                741,305
                                                                        ------------           ------------

         Total liabilities                                                 1,339,727                988,092
                                                                        ------------           ------------

Commitments and Contingencies (Notes 7 and 14):

Shareholders' equity (Notes 8):
     Common stock, no par value; 12,000,000
       (after increase on December 14, 2004) and
       11,000,000 shares, respectively authorized;
       9,961,210 shares issued and outstanding,
       respectively                                                       12,863,020             12,863,020

     Contributed capital                                                     483,549                461,049
     Accumulated deficit                                                  (3,404,629)            (1,313,829)
     Shares held for employee benefit (1,129,110 shares at cost)            (273,600)              (273,600)
                                                                        ------------           ------------
          Total shareholders' equity                                       9,668,340             11,736,640
                                                                        ------------           ------------

 Total liabilities and shareholders' equity                             $ 11,008,067           $ 12,724,732
                                                                        ============           ============

                                                             See accompanying notes to financial satements.

                                                                 F-3

<PAGE>


                                      ACCELR8 TECHNOLOGY CORPORATION
                                          STATEMENT OF OPERATIONS
                                 FOR THE YEARS ENDED JULY 31, 2005 and 2004

                                                             2005                      2004
                                                         -----------               -----------

Revenues (Note 7 and 12):
   OptiChem(TM) revenue                                  $   336,610               $   118,614
   Consulting Fees                                            90,000                       -0-
   License Fees                                               50,000                       -0-
   Option Fees                                                25,500                       -0-
                                                         -----------               -----------
     Total revenues                                          502,110                   118,614
                                                         -----------               -----------

Costs and expenses:
   Research and development                                1,304,888                   554,416
   General and administrative                                933,183                   872,198
   Amortization (Note 6)                                     235,608                   234,495
   Cost of sales                                             155,508                    65,630
   Depreciation                                               70,075                    48,298
   Marketing and sales                                        61,795                   106,169
   Abandoned trademark (Note 6)                                  -0-                    10,316
                                                         -----------               -----------

     Total costs and expenses                              2,761,057                 1,891,522
                                                         -----------               -----------

Loss from operations                                      (2,258,947)               (1,772,908)
                                                         -----------               -----------

Other (expense) income:
   Interest and dividend income                              153,312                    64,259
   Unrealized holding gain on investments (Note 2)            13,064                     9,827
   Miscellaneous                                               1,771                       -0-
                                                         -----------               -----------
     Total other income                                      168,147                    74,086
                                                         -----------               -----------

Loss from continuing operations                           (2,090,800)               (1,698,822)

Gain on sale of discontinued operations (Note 11)                -0-                   621,191

Income from discontinued operations (Note 11)                    -0-                   168,210
                                                         -----------               -----------

Net loss                                                 $(2,090,800)              $  (909,421)
                                                         ===========               ===========

Net loss per share:

Continuing operations                                          (0.21)              $     (0.17)

Discontinued operations                                          -0-                       .08
                                                         -----------               -----------

Basic and diluted net loss per share                     $      (.21)              $      (.09)
                                                         ===========               ===========

Weighted average shares outstanding                        9,961,210                 9,961,210
                                                         ===========               ===========


                                                            F-4
<PAGE>


                                                        ACCELR8 TECHNOLOGY CORPORATION
                                                     STATEMENTS OF SHAREHOLDERS' EQUITY
                                                  FOR THE YEARS ENDED JULY 31, 2005 and 2004


                                                                                            Retained      Shares Held
                                     Common Stock                                            Earnings         For          Total
                               ------------------------      Stock to     Contributed      (Accumulated     Employee   Shareholders'
                                 Shares       Amount         Be Issued       Capital         Deficit)        Benefit      Equity

Balances, July 31, 2003        9,586,210     12,488,020        375,000        544,132        (404,408)      (273,600)    12,729,144

Shares issued as part of
 class action
 settlement (Note 13)            375,000        375,000       (375,000)

Stock options issued for
 consulting services
(Note 8)                            --             --             --          (83,083)           --             --          (83,083)

Net loss                            --             --             --             --          (909,421)          --         (909,421)
                            ------------   ------------   ------------   ------------    ------------   ------------   ------------

Balances, July 31, 2004        9,961,210   $ 12,863,020   $       --     $    461,049    $ (1,313,829)  $   (273,600)  $ 11,736,640
                            ============   ============   ============   ============    ============   ============   ============

Extension of Stock Option
 Expiration Dates                 22,500         22,500

Net loss                            --             --             --             --        (2,090,800)          --       (2,090,800)
                            ------------   ------------   ------------   ------------    ------------   ------------   ------------

Balances, July 31, 2005        9,961,210   $ 12,863,020           --     $    483,549    $ (3,404,629)  $   (273,600)  $  9,668,340
                            ------------   ------------   ------------   ------------    ------------   ------------   ------------

                                                                                     See accompanying notes to financial statements.

                                                                     F-5

<PAGE>


                                             ACCELR8 TECHNOLOGY CORPORATION
                                               STATEMENTS OF CASH FLOWS
                                     FOR THE YEARS ENDED JULY 31, 2005 and 2004


                                                                                   2005           2004
                                                                               -----------     -----------
Cash flows from operating activities:
     Net loss from continuing operations                                       $(2,090,800)    $(1,698,822)
     Adjustments to reconcile net (loss) to net cash
        (used in) operating activities:
         Depreciation                                                               70,075          48,298
         Amortization                                                              235,609         234,495
         Increase (decrease) in fair value of stock options
            granted for services                                                    22,500         (83,083)
         Unrealized (gain) loss on investments                                     (26,332)         (7,852)
         Realized (gain) loss on sale of investments, interest and
           dividends reinvested                                                        -0-          (9,054)
         Abandoned trademark                                                           -0-          10,316
         (Increase) decrease in assets:
           Accounts receivable                                                     (28,399)        (14,864)
             Other Accounts receivable                                              50,000             -0-
           Inventory                                                                 3,043         (30,287)
           Prepaid expense and other                                              (194,125)          4,864

         Increase (decrease) in liabilities:
           Accounts payable                                                         56,564         (51,253)
           Accrued liabilities                                                     231,889          17,298
           Deferred revenue                                                          5,000          60,000
           Deferred compensation                                                   101,332          91,906
                                                                               -----------     -----------

       Net cash used in operating activities                                    (1,563,644)     (1,428,038)
                                                                               -----------     -----------

Cash flows from investing activities:
     Purchase of laboratory equipment                                              (84,189)       (128,469)
     Cost of obtaining patents and trademarks                                      (43,746)        (59,709)
     Contribution to deferred compensation trust                                   (75,000)        (75,000)
     Receipt of Note Payment                                                       133,333             -0-
                                                                               -----------     -----------


       Net cash used in investing activities                                       (69,602)       (263,178)
                                                                               -----------     -----------


Cash provided (used) by discontinued operations                                    (35,925)        162,695
                                                                               -----------     -----------

Cash provided by sale of discontinued operations
                                                                                       -0-          50,000
                                                                               -----------     -----------

Increase (decrease) in cash                                                     (1,669,171)     (1,478,521)

Beginning balance:                                                               7,233,430       8,711,951
                                                                               -----------     -----------

Ending balance:                                                                $ 5,564,259     $ 7,233,430
                                                                               ===========     ===========

Supplemental schedule of non-cash investing and financing activities:
       Receivables from sale of discontinued operations                              $ -0-         450,000


                                                           See accompanying notes to financial statements.

                                                         F-6
</TABLE>

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1    ORGANIZATION AND NATURE OF BUSINESS

          We were incorporated on May 26, 1982, under the laws of the State of
          Colorado. Prior to the acquisition of the OpTestTM suite of
          technologies ("OpTest"), which occurred in January of 2001, Accelr8
          Technology Corporation ("Accelr8" or the "Company") was primarily a
          provider of software tools and consulting services. We provided
          software tools and consulting services for system modernization
          solutions for VMS legacy systems. We sold the assets related to the
          software business on July 30, 2004 to Transoft Group Ltd. See Note 11
          and 15.

          On January 18, 2001, the Company acquired the OpTest suite of
          technologies from DDx, Inc. ("DDx"). The purchase of the assets of DDx
          provided the Company with a proprietary surface chemistry and
          quantitative instruments. The Company expects that its proprietary
          surface chemistry and quantitative instruments will support real-time
          analysis of medical diagnostic markers, pathogens, and bio-warfare
          agents.

          Since the acquisition of the assets, we have focused primarily upon
          research and development relating to the technologies acquired, and
          the development of revenue producing products related to that
          technology. We have manufactured and marketed OptiChem(R) coated
          microarraying slides ("OptiChem") and have also developed OptiChem(R)
          arrayable microtiter plate. In November of 2004 we licensed the use
          of OptiChem (See Note 7).

          During most of the fiscal year ended July 31, 2005, our primary focus
          shifted to development of a program to integrate our OptiChem(R)
          surface chemistry ("OptiChem"), QuanDx(TM) light-scattering
          quantitative assay instrumentation ("QuanDx"), and YoDx(TM) assay
          acceleration process ("YoDx") into a novel system for rapid bacterial
          identification and antibiotic resistance testing, the BACcelr8r(TM)
          ("BACcelr8r"). We intend to customize our technologies to the specific
          requirements of large licensees as well as develop new rapid pathogen
          detection assays.

NOTE 2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Use of estimates
          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions that affect the reported
          amounts of assets and liabilities and disclosure of contingent assets
          and liabilities as of the date of the financial statements and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

          Reclassifications
          Certain reclassifications have been made to the fiscal 2004 financial
          statements to conform to the fiscal 2005 financial statement
          presentation. Such reclassifications have no effect on financial
          position or net loss as previously reported.

          Concentration of credit risk
          Financial instruments that potentially subject the Company to
          concentrations of credit risk consist primarily of cash equivalents,
          accounts receivable, and notes receivable, including receivables from

                                      F-7

<PAGE>

                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          major customers. See Note 10. The Company places its cash equivalents
          with a high credit quality financial institution.

          The Company periodically maintains cash balances at a commercial bank
          in excess of the Federal Deposit Insurance Corporation insurance limit
          of $100,000. At July 31, 2005, the Company's uninsured cash balance
          was approximately $5,464,259, however, this amount is invested under a
          repurchase agreement with the bank and is collateralized by securities
          of the United States Federal agencies with approximate market value of
          102% of the investment.

          The Company grants credit to domestic and international clients in
          various industries. Exposure to losses on accounts receivable is
          principally dependent on each client's financial position. The Company
          performs ongoing credit evaluations of its clients' financial
          condition.

          Estimated Fair Value of Financial Instruments

          The carrying amounts of cash and cash equivalents, investments and
          other long-term liabilities approximates fair value at July 31, 2005
          and 2004.

          The carrying value of all other financial instruments potentially
          subject to valuation risk, principally consisting of accounts
          receivable and accounts payable, also approximate fair value.

          The following methods and assumptions were used to estimate the fair
          value of financial instruments:

          Cash and Cash Equivalents - The carrying amount approximates fair
          value. Investments - The carrying amount is based on quoted market
          prices plus cash. Other Long-Term Liabilities - The carrying amount
          approximates fair value.

          Cash and cash equivalents

          All highly liquid investments with an original maturity of three
          months or less at time of purchase are considered to be equivalent to
          cash.

          Property and equipment
          Property and equipment are recorded at cost. Maintenance and repairs
          are charged to expense as incurred and expenditures for major
          improvements are capitalized. Gains and losses from retirement or
          replacement are included in costs and expenses. Depreciation of
          property and equipment is computed using the straight-line method over
          the estimated useful life of the assets, ranging from five to seven
          years.

          Research and development
          Research and development costs charged to operations for the years
          ended July 31, 2005 and 2004 were $1,304,888 and $554,416,
          respectively.

          Intellectual property
          Intellectual properties are amortized over the period the asset is
          expected to contribute directly or indirectly to the Company's future
          cash flows. The Company evaluates the remaining useful life of each

                                      F-8

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          intellectual property that is being amortized each reporting period to
          determine whether events and circumstances warrant a revision to the
          remaining period of amortization.

          Included in intellectual property are patents, trademarks and
          technology. Intellectual properties are amortized over their estimated
          useful lives of 20 years.

          Long-lived assets
          Long-lived assets and certain identifiable intangibles to be held and
          used by the Company are reviewed for impairment whenever events or
          changes in circumstances indicate that the carrying amount of an asset
          may not be recoverable. The Company continuously evaluates the
          recoverability of its long-lived assets based on estimated future cash
          flows from and the estimated fair value of such long-lived assets, and
          provides for impairment if such undiscounted cash flows or the
          estimated fair value are insufficient to recover the carrying amount
          of the long-lived asset.

          Revenue recognition

          Consulting services:
          -------------------
          Consulting revenue is recognized at the completion of the contract.

          OptiChem(R):
          -------------
          Revenue is recognized when the Company ships the product.

          Sales returns and allowances:
          -----------------------------
          Allowances on accounts receivable and notes receivable are recorded
          when circumstances indicate collection is doubtful for particular
          accounts receivable. Receivables are written off if reasonable
          collection efforts prove unsuccessful. The Company provides for sales
          returns and allowances on a specific account basis.

          Deferred revenue
          Deferred revenue represents amounts billed but not yet earned under
          existing agreements.

          Income taxes
          The Company accounts for income taxes in accordance with Statement of
          Financial Accounting Standards ("SFAS") No. 109, "Accounting for
          Income Taxes," which requires an asset and liability approach to
          financial accounting and reporting for income taxes. Deferred income
          tax assets and liabilities are computed annually for differences
          between the financial statement basis and the income tax basis of
          assets and liabilities that will result in taxable or deductible
          amounts in the future. Such deferred income tax computations are based
          on enacted tax laws and rates applicable to the years in which the
          differences are expected to affect taxable income. A valuation
          allowance is established when necessary to reduce deferred income tax
          assets to the amounts expected to be realized.

          Earnings per share
          The Company follows SFAS No. 128, "Earnings Per Share," which requires
          companies to present basic earnings per share and diluted earnings per
          share. Basic earnings (loss) per share includes no dilution and is

                                      F-9

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          computed by dividing income (loss) available to common shareholders by
          the weighted average number of common shares outstanding for the
          period. Diluted earnings per share reflect the potential dilution of
          securities that could share in the earnings of an entity.

          The Company's net losses for the periods presented cause the inclusion
          of potential common stock instruments outstanding to be antidilutive.
          During the years ended July 31, 2005 and 2004, common stock options
          exercisable for 878,750 and 712,500 shares of common stock were not
          included in diluted loss per share as the effect was antidilutive due
          to the Company recording losses in each of those years. In addition,
          at July 31, 2005 and July 31, 2004 200,000 contingent options were not
          included in loss per share. See Note 8.

          Stock based compensation
          The Company accounts for stock based compensation to employees and
          directors using the intrinsic value method in accordance with
          Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
          Stock Issued to Employees," and related interpretations. The Company
          accounts for stock based compensation to non-employees in accordance
          with SFAS No. 123, "Accounting for Stock Based Compensation", as
          amended by SFAS No. 148, "Accounting for Stock-Based
          Compensation--Transition and Disclosure--an amendment to FASB No.
          123."

          The Company applies SFAS No. 123 and 148 in valuing options granted to
          consultants and estimates the fair value of such options using the
          Black-Scholes option-pricing model. The fair value is recorded as
          consulting expense as services are provided. Options granted to
          consultants for which vesting is contingent based on future
          performance are measured at their then current fair value at each
          period end, until vested. See "Recent Accounting Pronouncements" for
          additional discussion.

          The following table illustrates the effect on net loss if the Company
          had applied the fair value recognition provisions of SFAS 123:
<TABLE>
<CAPTION>

                                                                 Year Ended           Year Ended
                                                               July 31, 2005         July 31, 2004
                                                               -------------         -------------

<S>                                                             <C>                    <C>
          Net loss - as reported                                $(2,090,800)           $ (909,421)
          Deduct:  Total stock-based compensation
                   expense determined under fair
                   value based method for all awards               (574,894)              (34,866)
                                                                -----------            ----------

          Pro forma net loss                                    $(2,665,694)           $ (944,287)
                                                                ===========            ==========
              Earnings per share:
              Basic and diluted - as reported                   $      (.21)           $     (.09)
                                                                ===========            ==========
              Basic and diluted - pro forma                     $      (.27)           $     (.09)
                                                                ===========            ==========
</TABLE>


          Comprehensive income (loss)
          The Company follows SFAS No. 130, "Reporting Comprehensive Income,"
          which establishes standards for reporting and displaying comprehensive
          income (loss) and its components (revenues, expenses, gains and

                                      F-10

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          losses) in a full set of general-purpose financial statements. The
          Company has no other items that would be included in comprehensive
          income (loss).

          Recent accounting pronouncements
          In December 2002, the Financial Accounting Standards Board ("FASB")
          issued Statement of Financial Accounting Standards ("SFAS") No. 148,
          "Accounting for Stock-Based Compensation-Transition and Disclosure--an
          amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No.
          123, "Accounting for Stock-Based Compensation," to provide alternative
          methods of transition for a voluntary change to the fair value based
          method of accounting for stock-based employee compensation. In
          addition, SFAS No. 148 amends the disclosure requirements of SFAS No.
          123 to require prominent disclosures about the method of accounting
          for stock-based employee compensation and the effect of the method
          used on reported results in both annual and interim financial
          statements. The Company will continue to account for its stock-based
          compensation plan under the recognition and measurement principles of
          APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
          related Interpretations. See Note 8 for further discussion.

          In December 2004, the FASB issued SFAS No. 123 (revised 2004),
          "Share-Based Payment" (SFAS 123R), which replaces SFAS 123 and
          supercedes APB Opinion No. 25. SFAS 123R requires all share-based
          payments to employees, including grants of employee stock options, to
          be recognized in the financial statements based on their fair values.
          The proforma disclosures previously permitted under SFAS 123 no longer
          will be an alternative to financial statement recognition. For the
          Company, SFAS 123R is effective for periods beginning after December
          15, 2005. Early application of SFAS 123R is encouraged, but not
          required. We plan to adopt SFAS 123R on February 1, 2006 using the
          modified prospective application method described in the statement.
          Under the modified prospective application method, we will apply the
          standard to new awards, and to awards modified, repurchased, or
          cancelled after the required effective date. Additionally,
          compensation cost for the unvested portion of awards outstanding as of
          the required effected date will be recognized as compensation expense
          as the requisite service is rendered after the required effective
          date.

          In August 2005, the FASB issued SFAS No. 154, "Accounting Changes and
          Error Corrections." SFAS 154 changes the requirements for the
          accounting for and reporting of a change in accounting principle,
          requiring, in general, retrospective application to prior periods'
          financial statements of changes in accounting principle. The Company
          has adopted the provisions of SFAS No. 154 which are effective for
          accounting changes and corrections of errors beginning after December
          15, 2005. The adoption did not have a material effect on the results
          of operations of the Company."

NOTE 3    INVENTORY

          The Company purchases raw materials (custom chemicals and glass
          substrates) for producing OptiChem coated slides. Raw material on hand
          at the end of each reporting period is priced at cost based on the
          first-in first-out method. There was no work-in-process or finished
          goods inventory as of July 31, 2005 and July 31, 2004 as slides
          currently are made for specific orders and shipped as produced.

                                      F-11

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

NOTE 4    PREPAID EXPENSES AND OTHER CURRENT ASSETS

          On July 8, 2005 the Company signed a contract for engineering services
          requiring a total deposit of $200,000. This liability was accrued and
          the assets recorded as a deposit. Upon the completion of the project,
          this amount is to be offset against the final billings of the contract
          and is fully refundable if the contract is not completed.

NOTE 5    PROPERTY AND EQUIPMENT

          Property and equipment are recorded at cost
           and consisted of the following at July 31:    2005            2004
                                                       ---------      ---------
          Computer equipment                           $   4,960      $   2,056
          Laboratory and scientific equipment            383,722        305,724
          Furniture and fixtures                          14,401         11,114
                                                       ---------      ---------
             Total property and equipment                403,083        318,894
          Accumulated depreciation                      (172,236)      (102,161)
                                                       ---------      ---------
             Net property and equipment                $ 230,847      $ 216,733
                                                       =========      =========

          Depreciation expense for the years ended July 31, 2005 and 2004 was
          $70,075 and $48,298, respectively.

NOTE 6   INTELLECTUAL PROPERTY

          Intellectual property consisted of
             the following at July 31:              2004                2005
                                                -----------         -----------

          OptiChem technologies                 $ 4,454,538         $ 4,454,538
          Patents                                   223,991             180,245
          Trademarks                                 49,019              49,019
                                                -----------         -----------
                                                  4,727,548           4,683,802
          Accumulated amortization                 (848,579)           (612,970)
                                                -----------         -----------
                                                $ 3,878,969         $ 4,070,832
                                                ===========         ==========

          Future amortization expense for the intangible assets is estimated as
          follows:

                    Years Ending July 31,
                    ---------------------
                            2006                            $   235,473
                            2007                                235,473
                            2008                                235,473
                            2009                                235,473
                            2010                                235,473
                         Thereafter                           2,701,604
                                                             ----------
                  Total future amortization                  $3,878,969
                                                             ==========

                                      F-12

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          Intellectual properties are recorded at cost and are being amortized
          on a straight-line basis over their estimated useful lives of 20
          years, the patent and patent application life of the OptiChem(TM)
          Technologies. Amortization expense was $235,608 and $234,495,
          respectively, for the years ended July 31, 2005 and 2004. The Company
          routinely evaluates the recoverability of its long-lived assets based
          upon estimated future cash flows from and estimated fair value of such
          long-lived assets. If in management's judgment, the anticipated
          undiscounted cash flows or estimated fair value are insufficient to
          recover the carrying amount of the long-lived asset, the Company will
          determine the amount of the impairment and the value of the asset will
          be written down. The carrying amount of certain trademarks of $10,316
          was impaired during the fiscal year ended July 31, 2004 and charged to
          operations. As of July 31, 2005 and 2004, management believes there
          was no additional impairment of the Company's other long-lived assets.

NOTE 7.   LICENSE AND SUPPLY AGREEMENTS

          On November 24, 2004, the Company entered into a worldwide exclusive
          manufacturing and marketing license agreement (the "License
          Agreement") with SCHOTT Jenaer Glas GmbH ("SCHOTT"). The Company also
          entered into a supply agreement (the "Supply Agreement") with SCHOTT
          for OptiChem coated amine-reactive slides manufactured by the Company.
          (Slide H)

          Pursuant to the License Agreement SCHOTT paid the Company a
          non-refundable fee of $100,000, of which $50,000 was credited against
          future royalties.(See Note 12) An additional $15,000 in deferred
          revenue has been recorded for training supplied to SCHOTT. During the
          2-year term of the License Agreement SCHOTT agreed to pay the Company
          a royalty payment equal to 6% of net sales of products licensed under
          the License Agreement. If the total net sales during the initial
          2-year term equal or exceed $1,125,000, then the total royalty payable
          by SCHOTT for the initial term shall be a flat fee of $90,000. An
          optional 1-year extension may be exercised by SCHOTT by payment of a
          $90,000 upfront renewal fee.

          Pursuant to the Supply Agreement, the Company supplied SCHOTT 10,000
          OptiChem coated microarraying slides, including 1,000 slides purchased
          prior to the execution of the Supply Agreement, at a price of $14.00
          each. The Supply Agreement also included an option to SCHOTT until
          December 31, 2005 to negotiate an exclusive license for the
          application of OptiChem coatings on multi-well microtiter plates. In
          return, SCHOTT provided 7,500 glass substrates to the Company at no
          charge. The option is valued at $12,750 and has been recorded as a
          option fee. The supply agreement was amended on April 25, 2005 to
          include the purchase of an additional 5,000 slides through July 15,
          2005 under the same terms.

          On June 2, 2005, the Company and SCHOTT entered into a second supply
          agreement (the "Second Supply Agreement") for an additional formula of
          OptiChem (Slide HS).

          Pursuant to the Second Supply Agreement, the Company will supply a
          minimum of 5,000 OptiChem Slide HS streptavidin coated microarrying
          slides to SCHOTT on a non-exclusive basis, at a price of $20.82 each
          for the first 1,000 slides and $17.15 for the remaining slides.


                                      F-13

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          The Second Supply Agreement for Slide HS with SCHOTT expires on
          December 31, 2005. The Company also granted an option for SCHOTT to
          receive a non-exclusive right to manufacture and sell, up to 12,500
          glass slides, from January 1, 2006 to December 31, 2006. If SCHOTT
          exercises this right, SCHOTT shall pay the Company $15,000 for
          training on manufacturing of Slide HS. In addition, for this right,
          SCHOTT agreed to provide 7,500 glass substrates to the Company at no
          charge. The slides are valued at $12,750 and that amount has been
          recorded as option fees.

          The Company also granted SCHOTT the right to negotiate an exclusive
          right for the manufacturing and worldwide sales of Slide HS coatings
          on microarraying slides. Schott must formally initiate negotiations by
          October 1, 2005 and complete the agreement by December 31, 2005. (See
          Note 15)

NOTE 8    SHAREHOLDERS' EQUITY

           Authorized Shares of Common Stock
          On December 14, 2004 the Shareholders adopted an amendment to the
          Company's Articles of Incorporation, as amended, to increase the
          number of authorized shares of the Company's no par value common stock
          from 11,000,000 to 12,000,000.

          Stock option plans
          The Company has option agreements with key executives and two
          stock-based compensation plans, which are discussed below:

          Option and warrant agreement with key executive
          In fiscal 1998, options for the purchase of 1,129,110 shares held by
          the Chief Executive Officer ("Executive Options and Warrants") were
          exercised and placed into a "Rabbi" Trust as discussed in Note 12.
          Such shares are issuable upon the occurrence of retirement, death or
          termination of the Chairman's employment over a ten-year period after
          such occurrence, unless the Board of Directors determines otherwise.

          In accordance with generally accepted accounting principles, the
          Company has included the assets and liabilities of the "Rabbi" Trust
          in its financial statements, and the shares of the Company's common
          stock held by the "Rabbi" Trust have been treated as treasury stock
          for financial reporting purposes and have no voting rights. (See Note
          14)

          Qualified stock option plan
          The Company has reserved 700,000 shares of its authorized but unissued
          common stock for stock options to be granted to officers and employees
          of the Company under its Incentive Stock Option Plan (the "Incentive
          Plan"). The exercise price of each option, which has a maximum
          ten-year life, is established by the Company's compensation committee
          on the date of grant. For the year ended July 31, 2005, $15,000 was
          charged to compensation expense for the extension of certain option
          expiration dates.

          As of July 31, 2005, 477,500 options had been granted pursuant to the
          Qualified Plan with 2,500 of these options exercised and 222,500
          available for grant.

                                      F-14

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          Non-qualified stock option plan
          The Company has reserved 300,000 shares of its authorized but unissued
          common stock for stock options to be granted to independent
          contractors, technical advisors and directors of the Company under its
          Non-Qualified Stock Option Plan (the "Non-Qualified Plan"). The
          exercise price of each option, which has a maximum ten-year life, is
          established by the Company's compensation committee on the date of
          grant. On May 7, 2002, the Company issued options to purchase 100,000
          shares of its common stock to consultants for services to be provided
          at exercise prices of $2.25 per share. The consultant options vest 50%
          after one year and 50% after two years and renew two years after
          vesting provided the consultant is still retained. The fair value of
          these options is measured each reporting period until vested. The fair
          value adjustment of consultant option expense for the year ended July
          31, 2004, was a decrease to expense of $83,083. There was $7,500
          charged for compensation expense in the year ended July 31, 2005 for
          certain options related to the extension of expiration dates.

          As of July 31, 2005, 250,000 options had been granted pursuant to the
          Non-Qualified Plan with 75,000 of these options exercised and 50,000
          available for grant.


          Omnibus Stock Option Plan
          On December 14, 2004 the Shareholders approved an Omnibus Stock Option
          Plan and reserved 500,000 shares of its authorized but unissued common
          stock for stock options to be granted to employees, independent
          contractors, technical advisors and directors of the Company.

          As of July 31, 2005, 320,000 options had been granted pursuant to the
          Omnibus Plan with none of these options exercised and 180,000 were
          available for grant.

          Contingent options
          In connection with the purchase of the YoDx technology discussed
          above, the Company agreed to issue an additional 200,000 stock options
          with the same terms upon the earlier of (a) the Company achieving
          certain accumulated revenue levels associated with the YoDx(TM)
          technology, as defined in the agreement, or (b) a change in control of
          the Company prior to the expiration date of the options. As of July
          31, 2005, the contingent provisions have not been met and the options
          have not been granted. The Company has reserved a sufficient number
          of shares for such options.

          Accounting for employee based option plans
          The Company accounts for employee stock-based compensation
          arrangements using the intrinsic value method in accordance with APB
          No. 25 and related interpretations and has adopted the disclosure-only
          provisions of SFAS No. 123 as amended by SFAS No. 148. Accordingly, no

                                      F-15

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          compensation expense has been recognized for options issued to
          employees in conjunction with the stock option agreements and
          stock-based compensation plans discussed above.

          The fair value of options granted under the stock option agreements
          and stock-based compensation plans discussed above is estimated on the
          date of grant using the Black-Scholes option pricing model with the
          following weighted-average assumptions used for grants in fiscal 2004:
          no dividend yield; risk free interest rate of 4.0%; expected life of 4
          years; and expected volatility of 120.36%. The weighted average fair
          value of options granted in fiscal 2004 was $0.33. The weighted
          average remaining contractual life of options outstanding at July 31,
          2004 was 4.2 years.

          The following weighted-average assumptions were used for grants in
          fiscal 2005: no dividend yield; risk free interest rate of 5.0%;
          expected life of 4 years; and expected volatility of 59% The weighted
          average fair value of options granted in fiscal 2005 was $2.59. The
          weighted average remaining contractual life of options outstanding at
          July 31, 2005 was 5.7 years.

          The following table summarizes information on stock option activity
          for the Executive Options, the Omnibus Plan, the Qualified Plan and
          the Non-Qualified Plan, excluding the 275,000 contingent options.
<TABLE>
<CAPTION>

          ---------------------------------------- --------------- ------------------ ---------------------
                                                                                        Weighted Average
                                                     Number of      Exercise Price       Exercise Price
                                                       Shares          Per Share           Per Share
          ---------------------------------------- --------------- ------------------ ---------------------
<S>                                                     <C>           <C>    <C>              <C>
          Options outstanding, July 31, 2003            755,000      $1.45 - $3.25             $1.89
          ---------------------------------------- --------------- ------------------ ---------------------
          Options granted                                 7,500       2.85 -  3.20             $2.97
           ---------------------------------------- --------------- ------------------ --------------------
          Options exercised                                 -0-
          ---------------------------------------- --------------- ------------------ ---------------------
          Options expired or cancelled                  (50,000)      2.50 -  2.50             $2.50
          ---------------------------------------- --------------- ------------------ ---------------------

          ---------------------------------------- --------------- ------------------ ---------------------
          Options outstanding, July 31, 2004            712,500       1.45 -  3.25             $1.85
          ---------------------------------------- --------------- ------------------ ---------------------
          Options granted                               322,500       2.10 -  3.10             $2.59
           ---------------------------------------- --------------- ------------------ --------------------
          Options expired or cancelled                  (65,000)      2.25 -  3.25             $2.46
          ---------------------------------------- --------------- ------------------ ---------------------

          ---------------------------------------- --------------- ------------------ ---------------------
          Options outstanding, July 31, 2005            970,000      $1.45 - $3.20             $2.06
          ---------------------------------------- --------------- ------------------ ---------------------

          As of July 31, 2005 and 2004, 878,750 and 677,500 options outstanding
          were currently exercisable and carried weighted average exercise
          prices of $2.00 and $1.83 respectively. The following table summarizes
          information about stock options outstanding and exercisable at July
          31, 2005:

                                      F-16

<PAGE>


                                          ACCELR8 TECHNOLOGY CORPORATION
                                          NOTES TO FINANCIAL STATEMENTS

              -------------------- -------------------------------------------- ----------------------------
                                                    Outstanding                         Exercisable
              -------------------- -------------- -------------- -------------- -------------- -------------

                   Range of           Number      Weighted         Weighted        Number        Weighted
                                                     Average
                                                    Remaining       Average                      Average
                Exercise Prices                    Contractual     Exercise                      Exercise
                                                  Life (Years)       Price                        Price
              -------------------- -------------- -------------- -------------- -------------- -------------

                 $1.45 - $1.50         385,000         5.2           $1.47          385,000       $1.47
              -------------------- -------------- -------------- -------------- -------------- -------------
                 $2.25 - $2.25         257,500         1.8           $2.25          255,000       $2.25
              -------------------- -------------- -------------- -------------- -------------- -------------
                 $2.57 - $2.90         320,000         9.5           $2.59          238,750       $2.59
              -------------------- -------------- -------------- -------------- -------------- -------------
                 $3.10 - $3.20           7,500         3.2           $3.13               -0-       -0-
                                         -----                                      -------
              -------------------- -------------- -------------- -------------- -------------- -------------

              -------------------- -------------- -------------- -------------- -------------- -------------
                 $1.45 - $3.20         970,000         5.7           $2.06          878,750       $2.00
              -------------------- -------------- -------------- -------------- -------------- -------------
</TABLE>

NOTE 9   INCOME TAXES

          The following items comprise the Company's net deferred tax assets
          (liabilities) as of July 31:

                                                         2005           2004
                                                     -----------    -----------
          Deferred tax assets:
          Net operating loss                         $ 1,697,300    $   881,662
          Deferred revenue                                24,087         22,200
          Depreciation and amortization                  140,181        (29,848)
          Stock options issued to consultants             45,023         36,630
          General business credit                        109,516        102,696
                                                     -----------    -----------
          Total                                        2,016,107      1,013,340
          Less valuation allowance                    (2,016,107)    (1,013,340)
                                                     -----------    -----------
          Net deferred tax asset                     $      --      $      --
                                                     ===========    ===========


          As of July 31, 2005, a valuation allowance of $2,016,107 has been
          recorded for the deferred tax asset, as management has determined that
          it is more likely than not that the deferred tax asset will not be
          realized.

                                      F-17

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          Total income tax expense (benefit) differed from the amounts computed
          by applying the U.S. Federal statutory tax rates to pre-tax loss for
          the years ended July 31, 2005 and 2004 as follows:

                                                               2005       2004
                                                               ----       ----
          Total expense (benefit) computed by:
          Applying the U.S. Federal statutory rate            (34.0%)    (34.0)%
          State income taxes, net of Federal tax benefit       (3.0)      (3.0)
          General business credits and other                   (3.8)      (3.8)
          Valuation allowance                                  40.8       40.8
                                                               ----       ----
          Effective tax rate (benefit)                           - %        -  %
                                                               ----       ====

          The Company has unused net operating loss carry forward of
          approximately $4,500,000 and general business credits of approximately
          $110,000 that are available to offset future income taxes. The net
          operating loss will expire beginning in 2013 and the general business
          tax credits expire from 2006 through 2024.

NOTE 10   MAJOR CUSTOMERS AND FOREIGN REVENUE

          For the years ending July 31, 2005 and 2004, OptiChem revenues were
          $336,610 and $118,614 respectively. Of those amounts, sales from one
          customer were $318,545 (94.6%) in the year ended July 31, 2005 and
          $63,700 (53.7%) for the year ended July 31, 2004.

          In fiscal 2005 the consulting revenues of $90,000 were all from one
          customer.

          Foreign Revenues were as follows:

---------------------------------- --------------------- ----------------------
Foreign Revenues                           2005                  2004
                                           ----                  ----
---------------------------------- --------------------- ----------------------
OptiChem Revenues                        $318,545               $63,700
---------------------------------- --------------------- ----------------------
License Fees                              50,000                  -0-
---------------------------------- --------------------- ----------------------
Option Fees                               25,550                  -0-
                                          ------                -------
---------------------------------- --------------------- ----------------------
                           Total         $394,085               $63,700
                                         ========               =======
---------------------------------- --------------------- ----------------------

NOTE 11   SALE OF SOFTWARE MIGRATION TOOLS

          On July 30, 2004, the Company entered into an asset sale agreement and
          closed the transaction selling substantially all of the business
          assets of the software business for an aggregate purchase price of
          $500,000; payable $100,000, at the time of closing and a promissory
          note with principal payable in three equal annual installments of
          $133,333 beginning July 15, 2005. The promissory note bears interest
          at 4% on the unpaid balance, payable quarterly, beginning September
          30, 2004. The note is secured by a security interest in the
          Intellectual Property Rights of the VMS migration tools, the Assumed
          Prepaid Software Maintenance and Support Agreements (as defined in the
          Purchase Agreement) that were assumed by Debtor, and eighty-five
          percent (85%) of the payments received by Debtor pursuant to its
          support of the FMS product developed by CIM Team (the "Support
          Payments") and held in reserve in the Dedicated Account for the
          benefit of the Company. In addition, the purchase price includes the
          waiver of any support by the Company to those maintenance customers
          who have pre-paid their annual maintenance prior to the closing. The
          estimated post closing expenses associated with the sale were accrued
          at July 31, 2004. The sale of the assets resulted in a gain on sale of
          discontinued operations of $621,191. The note, including accrued
          interest, was paid in full on August 31, 2005. (See Note 15)

                                      F-18

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          Net income from the discontinued operations for the year ended July
          31, 2004 was $168,210. A summary of income and expenses for the year
          ended July 31, 2004 is summarized below:

                                                                        2004
                                                                      --------

          Revenues                                                    $418,504
                                                                       -------

          Cost of sales                                                 80,329
          Administrative and marketing                                 165,260
          Depreciation                                                   4,705
                                                                      ---------
          Total costs and expenses                                     250,294
                                                                      --------
          Income from discontinued operations                         $168,210
                                                                      ========

NOTE 12   DEFERRED REVENUE

          On April 12, 2004, the Company signed a proof of principle testing
          agreement with a major life sciences company (the agreement has a
          non-disclosure clause as to name of entity). Under the agreement,
          Accelr8 will develop a customized surface coating to be applied to
          blank substrates provided by the customer. The agreement calls for the
          delivery of twelve (12) unoptimized experimental coated substrates
          within twenty-one (21) days of the effective date of the agreement and
          the final fifty (50) customized coated substrates no later than June
          25, 2004. The agreement specified a $60,000 payment to Accelr8 within
          ten (10) business days of the signing of the agreement and an
          additional $30,000 payment within ten (10) business days after the
          final fifty customized substrates are delivered. The Company delivered
          the first twelve (12) substrates on April 19, 2004 and received the
          $60,000 payment on May 7, 2004. This amount was reflected as deferred
          revenue as the Company had continuing service obligations as of July
          31, 2004. The remaining customized coated substrates were received by
          the customer on September 20, 2004 and $30,000 was invoiced and paid
          October 29, 2004. The total contract price of $90,000 was reflected as
          revenue in the year ended July 31, 2005.

          On November 24, 2004, the Company entered into a worldwide exclusive
          manufacturing and marketing license agreement (the "License
          Agreement") with SCHOTT Jenaer Glas GmbH ("SCHOTT"). The Company also
          entered into a supply agreement (the "Supply Agreement") with SCHOTT
          for OptiChem coated amine-reactive slides manufactured by Accelr8.
          (See Note 6). Deferred revenues of $50,000 in prepaid royalties and
          $15,000 for training have been paid, but not realized at July 31,
          2005.

NOTE 13   NON-CASH FINANCING AND INVESTING ACTIVITY

          On July 30, 2004, the Company received a note receivable totaling
          $400,000 and accounts receivable totaling $50,000 in connection with
          the software business sale discussed in Note 11.

                                      F-19

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

NOTE 14   COMMITMENTS

          Investments and deferred compensation arrangement
          In January 1996, the Company established a deferred compensation plan
          for key employees. Contributions to the plan are provided for under
          the employment agreement with Thomas V. Geimer, which is detailed at
          the end of this note. For each of the fiscal years ended July 31, 2005
          and 2004, the Company contributed $75,000 to the plan which was
          accrued but unpaid by the Company at year end.

          The following information is provided related to the trust assets,
          which consist of cash and equity securities as of July 31, 2005 and
          2004. These assets, which based upon the Company's intended use of the
          investments, have been classified as trading securities. Unrealized
          holding gains or loss on trading securities are included in other
          income (expense).

                                                           2005           2004
                                                           ----           ----
          Cost basis                                   $760,545       $685,545
          Unrealized holding gain (loss)                  7,092       (19,240)
                                                          -----       --------
                    Aggregate fair value               $767,637       $666,305
                                                       ========       ========


          Deferred compensation related to the Rabbi Trust was $842,637 and
          $741,305 as of July 31, 2005 and 2004, respectively. The difference
          between the aggregate fair value and the deferred compensation amounts
          represents the award of $75,000 for each of the years ended July 31,
          2005 and 2004 which was accrued but unpaid by the Company at year end.

          Operating leases
          The Company has renegotiated a three-year lease for its office and
          laboratory space with a term of October 1, 2004 through September 30,
          2007. Total rent expense was approximately $57,862 and $85,681 in
          fiscal 2005 and 2004, respectively. Future minimum lease payments on
          the office and laboratory lease are as follows:

                       Year Ending               Premises
                         July 31,                  Rent
                         --------                  ----
                           2006                  $ 57,471
                           2007                    59,374
                           2008                     4,970
                                                 --------
                                                 $121,815
                                                 ========

          Employment agreement
          Effective December 1, 2002, a new employment agreement with Thomas V.
          Geimer, CEO and CFO, was negotiated and approved by the Compensation
          Committee. The new agreement provides for an annual base salary of
          $165,000 with annual deferred compensation of $75,000. The new

                                      F-20

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          agreement expires on December 31, 2007. In the event of termination by
          mutual agreement, termination "with cause," as defined in the
          agreement, death or permanent incapacity or voluntary termination, Mr.
          Geimer or his estate would be entitled to the sum of the base salary
          and unreimbursed expenses accrued to the date of termination and any
          other amounts due under the agreement. In the event of termination
          "without cause," as defined in the agreement, Mr. Geimer would be
          entitled to the sum of the base salary and unreimbursed expenses
          accrued to the date of termination and any other amounts due under the
          agreement and an amount equal to the greater of Mr. Geimer's annual
          base salary (12 months of salary) or any other amounts remaining due
          to Mr. Geimer under the agreement, which as of July 31, 2005 would be
          $580,000. Additionally, in the event of a change in control, any
          unpaid amounts due under the initial term of the agreement for both
          base salary and deferred compensation would be payable plus five times
          the sum of the base salary and deferred compensation.

NOTE 15   SUBSEQUENT EVENTS

          Note Receivable- On August 31, 2005, the note receivable of $266,667
          was paid in full with interest through that date. (See Note 11).

          License Agreement- On September 27, 2005 the Company signed an
          amendment to the "Supply Agreement" entered into June 2, 2005 and
          received notification of intent to Exercise a Manufacturing License
          with Schott Jenaer Glas GmbH ("Schott"). With this notification,
          Schott exercised its right to a worldwide, non-exclusive license to
          manufacture and market slide HS starting January 1, 2006 until
          December 31, 2006. Exercise of this right requires payment by Schott
          of $15,000 to Accelr8 for technology training and royalties specified
          in the Agreement. This non-exclusive right limits Schott to producing
          12,500 of Slide HS during 2006.

          On September 27, 2005, the Company received notification from Schott
          of its intent to exercise its right to negotiate an exclusive,
          worldwide manufacturing and marketing license for the application of
          OptiChem-Streptavidin coatings on microarraying slides (Slide HS).

          Feasibility Testing Agreement - Effective October 5, 2005, the Company
          and Promega Corporation ("Promega") entered into a Feasibility Testing
          Agreement (the "Agreement"). Pursuant to the Agreement, the Company
          will focus on the development of a customized coating for a glass
          slide product owned by Promega. The Agreement requires that the
          feasibility testing be divided into two phases. Promega will pay the
          Company $49,000 in return for Accelr8's performance under the

                                      F-21

<PAGE>


                         ACCELR8 TECHNOLOGY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

          Agreement. If Promega determines that Phase 1 is not successfully
          completed, the Company will return $22,000 to Promega and the Company
          will have no further obligation under the Agreement.

          On October 14, 2005 Schott confirmed to the Company that our
          obligation for training on the manufacture of Slide H was complete and
          $15,000 of the deferred revenue shown at July 31, 2005 will be
          recognized in the first quarter of fiscal 2006.


                                      F-22